Wyeth is the largest pharmaceutical company in the world with about $3bn in sales a year. In 2003, Wyeth Research spent about $2.1bn on research and development (R&D), placing it among the world’s leading pharmaceutical companies in terms of R&D commitment.

Nonetheless Wyeth, like its competitors, has some bitter pills to swallow. Speaking to a crowd of more than 300 guests at January’s Pennsylvania Biotechnology Association 2005 Annual Dinner at the Franklin Institute in Philadelphia, Dr Robert Ruffolo, president of Wyeth Research and senior vice-president of Wyeth, was painfully honest about the various problems that plague the drug industry.

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Bad press

The high cost of prescription drugs, bad press as a result of US Food and Drug Administration (FDA) recalls and new warnings on many leading drugs has pitted public opinion against pharmaceutical companies. “Pharmaceutical companies have a low standing in the community today,” said Dr Ruffolo.

Compounding the issue, pharmaceutical companies face countless costly lawsuits. “Wyeth has paid $16bn on lawsuits filled with fraud and abuse,” he said.

Unfortunately, the persistent threat of such lawsuits stifles innovation and shifts target profiles in clinical trails to 0% side effects. “We will never hit that profile given the complex and unique make up of each human being,” Dr Ruffolo said. “But pressure to do so makes our business the most risky industry in the world. It raises the question of how much a pharmaceutical company is willing to invest in R&D and drug research.”

Without ample drugs in the pipeline, more mergers and acquisitions will take place because that is the easiest way for pharmaceutical companies to add drugs to their portfolios without risk. The result is no new drug discoveries.

Dr Ruffolo said the situation was worse for cash-strapped biotech companies. “The cost of coming up with new drugs is staggering,” he said. “Where it used to cost $20m a year to go through clinic trials, now it costs $100m a year for three years to get to phase III,” he said. “The National Institute of Health (NIH) spends $27bn total on research. Biotech researchers spend $2bn-$3bn per new innovation.”

With clinical development going up by 20% a year, Dr Ruffolo does not see how drug discovery can be sustained. “Meanwhile, regulatory agencies say we need to establish social need for the drug,” he said. “This means more innovative targets that carry more risks and a greater failure rate.”

Patent problems

Adding to the cost of increased clinical trials is the cost of patents, which has reached $20,000 per patent in the US and $50,000 in Japan. “As regulation of these patents increases, the useful life of patents goes down,” he said.

Plus companies have to answer to the FDA in the US, and regulatory agencies in Europe, Japan and elsewhere in the world that have varying standards. “There is no harmonisation between these agencies,” he said. “It is extremely difficult to satisfy three different models.”

A deluge of counterfeit drugs on the market is also damaging the industry, said Dr Ruffolo. “60% of the drugs in China are counterfeit, 50% in India. Some are making their way into the US via Canada. These drugs may not be regulated by an agency. Therefore it becomes a safety issue because no drug is totally safe.”

Add to that issues of intellectual property. “All studies, by law, are to be presented to the FDA,” he said. “It is the group that determines the risk versus benefit.”

Risk versus benefit is something that the drug industry is constantly having to weigh up. Firms must be brave enough to face the potential for loss if they want to bag the potential profits.