Probably the single most important driver in the pharmaceutical
industry is the time-to-market. Companies secure
very significant returns in the early life of a successful drug,
before any competition. The competition-free life is shortening,
typically from 5 to 1–2 years. Competition in this
sense relates to similar (rather than exactly the same) drugs.
For example, Bayer’s anti-cholesterol drug Baycol was
withdrawn in 2001 due to safety concerns, and the two later
entrants Pravachol (from BMS) and Lipitor (from Pfizer) are
now the biggest sellers for their companies (Butler, 2002).
Given the significant potential for adverse health effects,
the industry is subject to very stringent regulation. This starts
from the processes used to evaluate the safety and efficacy
of the chemical compounds, through to the details of the
process and plant design and manufacturing operations. The
primary regulator that the companies must satisfy is the US
Food and Drug Administration. It may be the case that the
existence of regulatory protocols has hindered innovation in
this sector; with companies blaming regulators for their own
innate conservatism.
The regulatory process tends to be slow and expensive;
both these effects must be borne by the industry. Furthermore,
the complex chemical compounds involved have
more complex manufacturing processes, and the activities
of route investigation, process development, scale-up plant
design/retrofit, commissioning and qualification are either
increasing in duration or proving stubborn to shorten.
An estimate of £200–400m is required to launch a new
drug, and an average of 8–12 years elapses from patent filing
to first sale (see, e.g. Grabowski, 1997).
There is a general trend for companies to divest excess
capacity that came about from having many local manufacturing
sites, and move towards a global supply chain