Back small companies to deliver new medicines

The European Patent Office granted 66,700 new patents in 2013, of which 50 per cent were to companies based in Europe, with 22 per cent going to companies based in US and 18 per cent to Japan.

Over 16 per cent, or 10,777 of the granted patents were in pharmaceuticals (5,396) and biotechnology (5,381). Many of the patents in this field arise from public funds, either directly by grants, or indirectly through tax rebates on R&D spending by companies.

This leaves the big pharma companies sitting on a mountain of intellectual property (IP) that they will never exploit. Whilst bad for the wider industry, this harm is a fraction of the opportunity cost to patients.

Given that - in some cases - all of the research funding leading to the patenting of these inventions came from tax revenues, they should be made accessible to academic groups and SMEs. These organisations would be best suited to bring this technology to bear on key diseases and unmet medical needs. There is a collective moral responsibility for patent issuers, those that fund the research, and those that hold the IP, to work together to ensure this happens.

A “new model” from big pharma has allowed access to a few orphan drugs. Whilst this is a step in the right direction, it is only a trickle from the reservoir that is still held captive. The dam needs to be breached to allow much deeper and faster access to the stockpile of high potential molecules.

Shrinking revenues

Big pharma is facing shareholder pressure to define a long-term business model that will deliver sustainable top line and bottom line growth. Shareholders see shrinking revenues as multiple patents expire, limited success in securing new small molecule drug approvals and intense competition from generics. In addition, after shutting many R&D labs and facilities, pharmaceutical companies have exhausted their in-house cost reduction opportunities.

Somewhat predictably, global pharma has yet again turned to mega-deal merger and acquisition as the new/old cure for its financial miseries. This has included asset swaps between Novartis and GlaxoSmithKline, Pfizer’s failed attempt to acquire AstraZeneca, Abbvie’s ongoing pursuit of Shire.

Patients, healthcare professionals and the public should not be fooled that these twists and turns have anything to do with improving patient care. Neither will this result in finding cures, or increasing survival and quality of life for those diagnosed with terminal illnesses. It is about maintaining the pharma industry status quo, status, influence and profitability.

Efficient R&D

The current global, fully-vertical, big pharma business model is obsolete and ineffective. It does not deliver the new drugs and treatments that are needed. Big pharma is of course, very good at many aspects of the business, including supply chain management, dealing with complex regulatory affairs, and global sales and marketing. It’s been obvious for a long time however, that it is not good at R&D.

Pharmaceutical R&D receives significant funding from the EU. It is therefore in the interest of taxpayers - most of whom will be patients at some point - that R&D is done efficiently. R&D functions at its best in smaller, more agile and innovative structures like SMEs.

Change can be achieved quickly, providing substantial returns, with a few quick and simple developments: first there should be no more R&D tax rebates or subsidies for big pharma; second, current state subsidies and grant funding for therapeutics R&D should be replaced with start-up and development capital.

This would mean the taxpayer becomes a shareholder in myriad companies whose mission is to actually find ways to improve their health. That would be a very worthwhile dividend.