Can Corporate Entrepreneurship Cure Big Pharma?

Most of us are all too familiar with the current state of big pharmaceutical companies. These giants plow an enormous amount of money into R&D for often mediocre results, leading to outrageously-high drug prices, slow movement, and the ever-present reminder that there are an uncountable amount of diseases out there still needing to be cured. As a result, these giants risk being drown out by generic companies, which fight the soaring drug prices but still do little to advance the state of pharmaceutical research. It is clear that a change must be made toward real, meaningful research.

Some firms have begun experimenting with various methods of bringing a more entrepreneurial R&D process to large pharmaceutical companies in order to better encourage long-term value creation through innovation. In particular, there appears to be an emphasis on small, relatively autonomous divisions within R&D which specifically focus on a very small number of therapeutic areas and driving one or two breakthrough solutions in these areas to early clinical trials. GlaxoSmithKline and Vertex Pharmaceuticals have had successes with bringing the small company R&D feel to big pharma research in this way. Pfizer attempted to take this further, establishing therapy group skunkworks projects in the form of a network of small companies, but this has since been dissolved. GlaxoSmithKline has implemented a reward system to compensate for breakthrough innovation and Eli Lilly is examining the possibilities of doing the same. Eli Lilly has also been successful at investing in integrating other companies into their R&D network in order to have several different sources of innovation working together (Douglas, Narayanan and Mitchell). Dr. Shreefal Mehta, currently CEO of the Paper Battery Company, a board member of Pulmokine and an entrepreneur who has been involved in the founding of two biotechnology firms noted that many of these efforts get killed off due to large changes of management when these big pharmaceutical firms acquire other companies- “During these acquisitions many new management figures become involved. If someone doesn’t like the direction this innovation machine is headed in, it is killed off before any results can be obtained.” These big pharmaceutical firms need to adopt some sort of protective framework for these entrepreneurial divisions if they are going to survive in this existing corporate structure.

Too often large pharmaceutical firms are judged by the number of new chemical compounds which proceed to clinical trials (Douglas, Narayanan and Mitchell). This focus on volume rather than real breakthrough medical discoveries has lead to a pharmaceutical equivalent of incremental innovation in which the reality is that many of these new compounds are simply some minor additions made to an existing compound in order to be able to quantify it as a novel innovation. Dr. Mehta says that risk adversity plays a big part in the sluggishness of big pharma R&D, whereas in small companies there is a drive to make a true breakthrough in order to gain notoriety and to really help people. This kind of short-sightedness in research mirrors the quarter-to-quarter short termism that is rampant in large, public companies in order to keep shareholders happy and, similarly, creates a largely stagnant, numbers-based form of R&D that does not add any real value to the industry. With the kind of advances being made in drug discovery thanks to advances in big data analytics and its relation to chemical compound discovery, there are more effective methods than ever to create a pool of potential compounds likely to be game-changing for the pharmaceutical industry, and there is becoming less and less reason that these large corporations cannot organize a push towards real breakthrough innovation in a way that could save countless lives.  Failure to do so will result in extinction as these pharmaceutical giants are outcompeted in price by generics, sealing the fate of meaningful R&D in the pharmaceutical industry.

As these innovative changes have begun to take hold over the last few years, it will be interesting to see if there will be new life breathed into R&D at big pharma companies. These companies must overhaul the way they do drug discovery if they hope to stay competitive and beat back the growing tide of generic medications. Only time will tell if they are able to adapt quickly enough to these new models of innovative discovery.

-Stephen Notley

Works Cited

Douglas, Frank L., et al. “The case for entrepreneurship in R&D in the pharmaceutical industry.” Nature Reviews, Volume 9, September 2010 (2010): 683-689.

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