Why Big Pharma is Shutting Down R&D (lessons from Sandwich)

Why did Pfizer close down its plant in Sandwich? In the last years the pharmaceutical industry has been increasingly worried not only about block-buster pipelines drying up and important patents coming to a close, but also (perhaps mainly) about the general fall in R&D productivity: increases in R&D spending with little rise in discovery rates of new molecular entities (NMEs). In fact, most of the new drugs have been invented in the labs of small biotech companies, universities, and federally funded labs such as the National Institute of Health (NIH) in the US.

This is why big pharma has very recently decided that it might be just as good to close down its R&D facilities and buy in all the innovations from these potential collaborators (announced by many pharma CEOs in the 2009 FT conference on the pharma industry). The closing down of the Sandwich plant simply follows this logic. It was not the bad quality of UK science that drove them away, but the recognition that doing your own R&D is in fact a waste of time when you can just buy it in. Research from one of my recent PhD students (Lillian Jensen, Open University 2009) has found that in fact this might be dangerous since one of the benefits of engaging in in-house R&D has been to allow big pharma to indentify the best potential collaborators in an increasingly complex innovation landscape in which collaborations are essential.

But the fact that most of the NMEs with Priority rating (the radical new drugs) have not been invented by big pharma but by these other agents means that closing down their R&D labs has some justification: let small biotech and the public sector do the research, while big pharma focuses on what they are good at: the ‘development’ side of the R&D equation (including the expensive and lengthy clinical trials) and the marketing (which currently absorbs most of their revenue even though they prefer to talk about their ‘research’ expenses). 

Ignoring the potential problem raised above about their ability to identify collaborators, a great (but unfortunately unrealistic due to the power of lobbies) outcome of closing down their R&D labs might be that finally, admitting that most of the R&D that has led to new block-busters has not been in their own budgets anyway, prices of drugs will come down. That is, prices will no longer be propped up with the excuse that research budgets of these multinationals are so high.  In fact they never have been as high as they claim (for details see the work by the New England Journal of Medicine ex-editor Marcia Angell, 2004), but these closings are the ultimate proof.