title: Innovation in the pharmaceutical industry in EU and USA: sources of new medicines over the period of 1996-2016
Creators: name: Zagrijtschuk, Oleh
Publisher: name: TU Wien
Year: 2021
Subjects: subject: innovation
subject: pharmaceutical industry
subject: study
subject: transformation
subject: drugs

description: Productivity of pharmaceutical industry, calculated as the ratio of the number of new drugs introduced to the market (approved by the regulatory agencies) to the total R&amp;D costs of the entire industry, then, declined since the 1950s (Lendrem et al, 2015). The number of approved innovative drugs has grown only insignificantly in recent decades globally, and R&amp;D costs dramatically increased. This crisis has four main groups of reasons for such an adverse phenomenon in the industry (Scannell et al, 2012; Nosengo et al, 2016):1. strategy of research and selection of the target diseases: the “low-hanging” disease have been exhausted,2. high number of staff/FTEs specialists necessary for a full R&amp;D and approval cycle of a single drug,3. increase of regulatory control and scrutiny, and4. imbalances in the management of pharmaceutical companies: huge amounts of money are spent on the development and introduction of new drugs, their increased cost does not always reflect the clinical benefits.The four above mentioned reasons formed the basis for a powerful innovation shift in the activities of pharmaceutical companies - the transition to the field of biotech research. More and more attention is paid to biotech drugs, drugs for cancer and rare diseases, the treatment of which is difficult or unavailable, and therefore the corresponding drugs are much less prone to the problem of "low clinical benefits", and regulators practice approach of much lower resistance for these drugs to get to the market. Higher risk taking by more complex research would be impossible without the underlying basic science research by Academia, a new emerging player in the field of pharmaceutical discovery. Large players have significantly less innovative potential and flexibility, prefer to focus on production, marketing and sales, therefore, to replenish their pipelines, they often do not invest in early discovery stages themselves, but buy innovative startups. The small companies are more efficient, they spend much less time and money on drug development, use capital and infrastructure more efficiently, and will be created under conditions of unmet medical need. For example, instead of purchasing equipment and reagents themselves, they conduct research - both preclinical (on biological models and laboratory animals) and clinical (testing the safety and efficacy of a new drug in patients), using the capabilities and resources of highly specialized contract research organizations. Innovative designs are more likely to be utilized in the comparable situations by SME rather than by big companies (Mesa, Zagrijtschuk et al, 2019).In the light of the fact that big pharma became essentially dependent on external novelty to maintain their pipelines while being unable to come up with own innovation, academia emerged in the past decade from its usual role of basic research to looking for applicable tools and interventions against disease targets to investigate their therapeutic relevance. The novel targets and drugs will be acquired from universities prior to this investment, either directly via the license agreement, or passing the stage of a start-up or SME intermediate. Project managers and meeting the timelines, the usual industry standard, were common components to projects success of universities, alongside with the ability to publish research result in good journals. Over the time, this path became the mainstream of the industry. Thus, the principle questions about the origin of pharmaceutical innovation turns to become not where does the invention happen and makes its early steps, but rather if the invention is going to be done and noticed/explored by the party, able to create drugs, and if the supportive conditions will be created. Funnily, both big and small pharma create innovation – the latter ones develop innovative models to operate more efficiently, while the genuine innovation by discovery happes esewhere. Knowing, understanding and positively influencing the factors is essential to positive guide and enhance the output of the whole pharmaceutical industry. USA based companies and universities used to be much more efficient in adopting and advancing the new model, as seen in faster market growth in the context of more competitive environment for faster research application. This work will focus on description of the differences between EU and USA in term of where does the innovation for novel drugs come from, and which stakeholder party was able to push the idea as a product to the market. The observation period covers the end of nineties (still, the golden age of a classic, big pharma dominated markets) through 2004, when the transformation occurred in form of market harmonization in the EU and the first wave of market consolidation in the USA until 2016 – a representative year for VC centric approach of early innovation funding, driven by the risk taking readiness and availability of early risk money as decisive factor for pharmaceutical success of academia and SMEs.