Drug Development: The Short Story
1. An Overview of the Pharmaceutical Industry
- What is a Drug
- Therapeutic Categories
- How are Drugs Named?
- Industry Segments and Members
- Facts and Figures
- Frequently Used Terms
What is a Drug?
Drugs are generally defined as molecules which affect biological processes. In order to be effective, the molecule must be present in the body at an adequate concentration for it to act at the specific site in the body where it can exert its effect. Additionally, the molecule must be safe -- that is, metabolized and eliminated from the body without causing injury.
Since there are thousands of compounds which fit this broad classification, they are further categorized in order to highlight the relationship between their chemical structure and their pharmacological activity. Compounds with biological activity against a specific disease or targeted to a specific organ thus are collected into therapeutic categories. While there are over 275 therapeutic categories listed in the Merck Index, the major categories are:
- Cardiovascular (CV) and Pulmonary Agents: treat diseases of the heart and circulatory systems.
- Respiratory Agents: treat diseases of the lungs and airways such as asthma.
- Central Nervous System (CNS) Agents: address problems such as anxiety, depression, nausea, pain, dementia, Parkinson's disease, convulsions, and other problems in the brain and/or neurons.
- Chemotherapeutic Agents: fight infections arising from bacteria and viruses as well as oncological diseases.
- Diagnostic Agents: assist physicians in identifying diseases.
- Gene-based Agents: includes areas such as vaccines, human biologicals (insulin, human growth factor, interferon, interleukins, and others) and explores approaches to repairing defects in the genetic pathways which can lead to diseases such as sickle-cell anemia, polycystic kidney disease (PKD), and others.
- Immunology, Endocrinology and Metabolic Diseases: address a variety of areas including diabetes, autoimmune diseases (e.g., arthritis), hormones, and other autacoids.
- Gastrointestinal Diseases: ulcers, irritable bowel syndrome, etc.
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How are Drugs Named
Naming a drug is frequently a complicated procedure. Once the structure of the molecule is confirmed, it is assigned an internal code number which is specific to the company which discovered the compound. It is also registered in the company's chemical information system by its formal IUPAC (International Union of Pure and Applied Chemistry) name. If the molecule survives the development phase and is destined to become a marketed drug, each company is permitted to assign a proprietary (or trademarked) name to their compound before it is introduced to the market. In addition, the government -- through an organization known as The United States Pharmacopeial Convention and its United States Adopted Name (USAN) Council, assigns the drug's generic name (all known drugs are listed in the USAN Catalog) based on the compound's activity profile.
As an example, the Merck angiotensin converting enzyme (ACE) inhibitor, Vasotec, was assigned the internal code number MK-421 when it was first synthesized. The formal chemical name for Vasotec is (S)-1-[N-(1-ethoxycarbonyl)-3-phenylpropyl)-L-alanyl]-L-proline. The generic name assigned by the USAN is Enalapril. Merck has also released other formulations of Vasotec including Vaseretic. Information about drug names and their uses can be found in the Physicians' Desk Reference (PDR) and The United States Pharmacopeia Dispensing Information (USPDI).
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Industry Segments and Members
While it is difficult to categorize an industry as diverse as the pharmaceutical industry, companies can be generally separated into three major segments:
- established pharmaceutical companies which focused initially on small molecule variants of natural products;
- newer biotechnology driven companies which focus on proteins, peptides, nucleotides, and products derived from these sources; and
- diagnostics companies which use biotechnology and traditional organic chemistry to design probes for diseases.
The current industry mix blurs these distinctions since many larger organizations have departments which address each of these areas or have entered into collaborations with smaller companies which focus on one of these areas of research. Year-end 2000 data (in $millions except for number of employees), collected from annual reports to the Securities and Exchange Commission, for a selected group of the established pharmaceutical companies includes:
| Company | Annual Sales | Annual Earnings | Pharma Sales | Pharma Operating Income |
Number of Employees | Annual R&D Budget |
|---|---|---|---|---|---|---|
| Abbott Laboratories | $13,746.4 | $2,786.0 | $2,580.0 | $1,013.0 | 60,500 | $1,350.0 |
| American Home Products | $13,262.7 | $(2,370.8) | $10,798.0 | $2,930.0 | 48,000 | $1,688.0 |
| Amgen Inc | $3,629.4 | $1,138.5 | $3,629.4 | $1,138.5 | 7,300 | $845 |
| AstraZeneca | $18,103.0 | $2,548.0 | $15,804.0 | $2,909.0 | 50,000 | $2,893.0 |
| Biogen | $926.5 | $273.7 | $926.5 | $273.7 | 1,475 | $302.8 |
| Bristol-Myers Squibb | $18,216.0 | $4,711.0 | $13,896.0 | $3,613.0 | 44,000 | $1,939.0 |
| Chiron | $972.1 | $8.5 | $972.1 | $8.5 | 3,422 | $298.8 |
| Eli Lilly | $10,862.2 | $3,057.8 | $10,193.0 | $3,050.0 | 35,700 | $2,019.0 |
| Genentech | $1,736.3 | ($75.3) | $1,736.3 | ($75.3) | 4,459 | $489.9 |
| GlaxoSmithKline | $25,143.0 | $5,777.0 | $21,458.0 | $5,842.0 | 108,000 | $4,000.0 |
| Genzyme | $752.5 | $86.0 | $752.5 | $86.0 | 4,400 | $112.8 |
| Immunex | $861.9 | $154.4 | $861.9 | $154.4 | 1,425 | $166.7 |
| Johnson & Johnson | $29,139.0 | $4,800.0 | $11,954.0 | $4,175.0 | 98,500 | $2,926.0 |
| Merck & Company | $40,363.5 | $6,821.3 | $18,577.0 | $11,564.0 | 69,300 | $2,344.0 |
| Pfizer | $29,574.0 | $3,726.0 | $24,027.0 | $8,859.0 | 90,000 | $4,435.0 |
| Pharmacia Corporation | $18,144.0 | $717.0 | $10,824.0 | $2,087.0 | 59,000 | $2,753.0 |
| Schering Plough | $9,816.0 | $2,424.8 | $8,346.0 | N/A | 28,100 | $1,333.0 |
| TOTALS | $235,248.5 | $36,583.9 | $157,335.7 | $47,627.8 | 713,581 | $29,896.0 |
There are several companies which are listed among the top twenty, world-wide, which do not file financial statements with the SEC. Figures for these companies (in millions except for number of employees) that have been collected from press reports and other sources are listed below.
| Company | Annual Sales | Annual Earnings | Pharma Sales | Pharma Operating Income |
Number of Employees |
Annual R&D Budget |
|---|---|---|---|---|---|---|
| Aventis (in Euros) | 22,304.0 | 1,126.0 | 16,100.0 | 3,123.0 | 92,500 | 3,479.0 |
| Bayer (in Euros) | 30,971.0 | 1,816.0 | 10,028.0 | 1,476.0 | 122,100 | 2,393.0 |
| Boehringer Ingelheim (in Euros) | 6,188.0 | 377.5 | 5,888.0 | N/A | 27,325 | 968.0 |
| Hoffman-La Roche (in CHF) | 28,672.0 | 8,647.0 | 17,686.0 | 3,249.0 | 64,758 | 3,950.0 |
| Novartis (in CHF) | 35,805.0 | 7,210.0 | 17,611.0 | 5,403.0 | 67,653 | 3,228.0 |
| Totals (in USD) | $91,011.0 | $12,433.0 | $49,349.0 | N/A | 374,336 | $10,326.0 |
Current estimates for startup biotech and pharmaceutical companies put the number of US companies at over 3,000. Data (in $million except for number of employees) for some of the larger, publicly traded companies include:
| Company | Annual Revenues |
Annual Earnings |
Number of Employees |
Annual R&D Budget |
|---|---|---|---|---|
| Alkermes | $35.4 | ($68.0) | 415 | $54.5 |
| ArQule, Inc. | $50.3 | $3.9 | 304 | $18.6 |
| Incyte | $194.2 | ($30.0) | 1,322 | $192.6 |
| Isis | $37.3 | ($54.7) | 303 | $57.0 |
| Ligand | $48.1 | ($72.4) | 356 | $51.3 |
| Medimmune | $541.0 | $110.7 | 790 | $66.3 |
| Millennium | $196.3 | ($355.5) | 1,330 | $268.7 |
| Neurogen | $20.7 | ($15.7) | 187 | $28.0 |
| Scios | $12.7 | ($42.6) | 194 | $39.3 |
| Vertex | $78.1 | ($39.7) | 455 | $84.9 |
| TOTALS | $1,214.1 | ($564.00) | 5,656 | $861.2 |
Unlike most other industry groups (e.g., auto and steel), there is no dominant leader in the pharmaceutical industry. While the top twenty pharmaceuticals account for over 75% of world-wide revenue for the industry, individual companies do not have a large marketshare. The market leader for 2000 is Pfizer, however, sales for its products accounted for only 12% of total world-wide pharmaceutical sales. Given the wave of mergers within the industry, the ranking above can be changed quickly.
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Facts and Figures for the Industry
According to figures published in the Medical and Healthcare Marketplace Guide (11th Edition), the world-wide market (in $millions) for pharmaceuticals is as follows:
| Category | 1992 | 1993 | 1994 | 1995 |
|---|---|---|---|---|
| Total | $226,000 | $369,900 | $393,500 | $418,700 |
| Ethical | $238,100 | $252,100 | $266,900 | |
| OTC | $38,900 | $42,000 | $45,400 | |
| Medical Devices | $92,900 | $99,400 | $106,400 |
The market for therapeutic classes ($millions) in the United States for the period 1992-1994 (Medical and Healthcare Marketplace Guide, 11th Edition) and for 2000 (Pharmaceutical Research and Manufacturers Association report for 2000) been reported as follows:
| Category | 1992 | 1993 | 1994 | 2000 |
|---|---|---|---|---|
| CNS | $8,103 | $8,600 | $9,133 | $32,770 |
| Digestive/GI | $7,050 | $7,800 | $8,307 | $21,341 |
| Anti-infective | $7,060 | $7,665 | $8,270 | $17,504 |
| Respiratory | $5,024 | $5,475 | $5,968 | $8,677 |
| CV | $4,877 | $4,995 | $5,295 | $25,081 |
| Metabolic | $3,179 | $3,400 | $3,652 | $26,416 |
| Vitamin | $2,998 | $3,200 | $3,312 | $734 |
| Dermatological | $1,687 | $1,750 | $1,832 | $3,106 |
| Totals | $39,978 | $42,885 | $45,680 | $135,629 |
These figures can be contrasted to the R&D funds (in $millions) that members of the Pharmaceutical Research and Manufacturers of America reported for specific disease categories.
| Category | 1992 | 1993 | 1994 | 1999 |
|---|---|---|---|---|
| CV | $1,689 | $1,756 | $1,964 | $2,865 |
| CNS | $1,836 | $2,151 | $2,097 | $5,242 |
| Anti-infective and parasitic | $1,410 | $1,572 | $1,537 | $2,890 |
| Metabolic Diseases | $1,624 | $1,934 | $2,586 | $5,328 |
| Respiratory | $526 | $656 | $670 | $887 |
| GI | $377 | $453 | $367 | $1,091 |
| Biologicals | $414 | $410 | $436 | $830 |
| Dematological | $160 | $294 | $217 | $196 |
| Diagnostic Agents | $146 | $154 | $124 | N/A |
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Frequently Used Terms
A.D.M.E. - Absorption, Distribution, Metabolism, Elimination. Also known as drug metabolism. Scientists use a variety of techniques to follow the course of the drug through the body.
FDA - The Food and Drug Administration. The FDA regulates prescription and over-the-counter medicines for humans through its Center for Drug Evaluation and Research. The center's mission is to:
- approve drugs for marketing that are effective for their labeled
indications, provide benefits that outweigh their risks, are of high
quality, and have directions for use that are complete and honestly
communicated;
- facilitate early access to promising experimental drugs being developed
for serious illnesses with no adequate therapy;
- promote innovation and provide scientific leadership in the drug
development process;
- ensure that the safety and rights of patients in drug studies are
adequately protected; and
- ensure that the quality and safety of medicines are maintained after
marketing.
GLP - Good Laboratory Practices are a set of regulations which were established in 1976 to ensure that data from safety testing were collected in a uniform manner. The regulations cover three areas:
- facilities and equipment -- The facilities which will be used to conduct the safety tests must be adequately sized, have proper (and consistent) ventilation and lighting. Equipment used during the tests must be calibrated and rechecked at regular intervals to assure that data is collected consistently during the entire course of the study.
- personnel, training, and organization -- the company must be able to verify that all personnel on a study are qualified by education and testing to carry out the tests. The study director is responsible for project assignments, preparing Standard Operating Procedures (SOPs), monitoring the course of the study, and verifying that all procedures are followed.
- tests and controls. -- Standard Operating Procedures must be developed and followed throughout the study. These procedures must outline the steps that will be taken during the study to assure that tests are accurate and reproducible. Areas covered include computer systems used to collect and analyze data, methods for animal care, dosing, sample collection, report preparation, etc.
GMP - Good Manufacturing Practices are similar to GLP, however they are a set of regulations which control the manufacturing process for the new drug.
IND - Investigational New Drug. The IND application is made to the FDA to request that the company be allowed to examine a new chemical in humans. The IND contains a description of the chemical, a summary of the pharmacological and toxic effects observed in animals, the disposition of the potential drug, a description of the potential risks and side effects, and a detailed description of the methods that will be used in the clinical trials (the study protocol).
NCE - New Chemical Entity - a unique molecule which has no previous record of preparation.
NDA - New Drug Application. The NDA is similar in content to the IND, however, it contains the results of all of the clinical studies, descriptions of the manufacturing processes to be used, descriptions of the packaging for the new drug, and a copy of the proposed package insert which describes how the medication will be used and any precautions which should be followed. A shortened version of the NDA which can is used to request approval is the ANDA or Abbreviated New Drug Application.
OTC - Over The Counter. The popular name for non-prescription drugs such as aspirin, advil, Pepto Bismol, etc.
QAU - Quality Assurance Unit. This is a group of individuals which is responsible for monitoring the reports and records of safety testing to assure that they meet SOPs and all applicable government regulations. The group is organizationally separated from the persons performing the actual work.
A full Drug Development Glossary is available at http://www.webpress.net/interweb/cato/monitor/glossary.html
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