For the last century, drug development consisted of tiny-molecule treatments focused at mass audience. It worked for some patients while it didn’t for the rest. In some cases, we knew why it failed to work but often we didn’t. And then, at the turn of the last century, we started to understand a lot more on human genetics-the aspects that make us all unique. To make things better, we now know how to leverage on human genetics to make personalized medicines: biotech drugs. The way human beings are being medicated is witnessing a change that closely resembles what the internet has done so far to change our lives.
The biotech industry continues to churn out life-saving drugs while investors shower them with billions of dollars. The global biotech market is estimated to be worth $414.5 billion by the end of 2017. It’s not only about improving the health of people but meeting the rising demand in food in some of the populous nations like India and China that biotech has helped to achieve.
Despite the boom in the biotech industry, there are some grave challenges faced by this domain.
- High Levels of Risk
Biotech companies normally get patent protection for their products, giving them market lead time while they recover their expenses for research and development. Once the patent protection period expires, they have a more established market position than their competitors. This offers scope for massive rewards. However, investors need to weigh the potential for humongous returns that these firms offer against massive risks, which are in abundance. Firstly, there is a lengthy period of development when money is invested in R&D, with the only hope that they will launch a successful product. The expenses to develop a drug, for instance, could go as high as a billion dollars. And biotech companies have to get approval for their drugs from the FDA so that they can sell it in the market, which is an onerous and lengthy process.
There’s a whole series of trials along with human testing, with the FDA keeping a close watch at every stage. And sometimes, during the course of these trials, the product may turn out to be not a viable option. The entire process could take as long as a decade during which the firm is not making any profit on the product. Furthermore, there could be major technological changes during the R&D phase that could have a negative impact on the product.
According to a biotechnology industry report from Ernst & Young, around 36% of drugs fail to make it past the preliminary stage of drug development. The same report states that another 68% don’t make it past the intermediate stage while 40% get knocked out in the final stage. At this point, a lot of money and time has been invested in R&D.
And given that biotech firms have to face risky development processes, analysts have a harrowing time trying to accurately value them. This is one strong reason why the stocks of biotech firms are mostly volatile. Even if the biotech company is able to market its product, it still runs the risk of how well it will be received by the market and the likelihood of litigation risks in case any negative effects come in the way as people start using the product.
The soaring cost of healthcare, in particular, the cost of drugs is a political hot potato and is destined to remain so. No matter what the FDA might attempt or say, a major swath of the public, their governors and federal representatives do not seem to believe the pharmaceutical sector’s argument that R&D is funded by current prices and that price controls could eventually retard R&D. The concerns will likely get more heated when the value of exorbitant biotech treatments for serious conditions are debated.
A common pill used to treat cholesterol might cost $5 per day, which comes to approximately $1,825 per annum. Now compare that to a biotech drug that comes with a $20,000 per year price tag or something costlier. Jeff Kimmel from Walgreens,a leading US drugstore chain states that affordability when it comes to biotech medicines is one of the core issues across the board. He adds, “It’s an ethical dilemma.”
This could place purchasers and players, who are battling it out to find the appropriate cost sharing, on the defensive. Employers and insurers juggle actuarial worries with the risks of patient non-adherence besides the potential for inaccurate clinical results when coverage decisions are finally made. What happens when a patient cannot afford the extra expenses of a given treatment? What happens when a patient on a pricey chronic therapy maxes out his insurance benefits? What if an insurer avoids adding a biotech drug to its formulary only because of its acquisition cost? These instances may not be the norm, but their likelihood alarms some experts who see a crucial clash between profits and patients.
Protecting patient privacy is an increasing concern, thanks to latest advances in technology that’s making it possible to decipher human genome. However, as researchers become adroit at decoding an individual’s genetic composition, it’s highly possible that compromising information on a patient’s future health will gradually become available. This can lead to massive problems. For example, it will be possible to know that a 6-year-old may develop serious heart complications later in life. The question now is whether a prospective employer has the right to know about this. How will this knowledge impact the person’s ability to get a job, mortgage, or insurance? Should such confidential information be made available to others? This is a sharp problem and is destined to get only sharper. Randy Vogenberg, PhD, at Aon Consulting, asks if a genetic test of a patient comes back positive, with the biologic treatment costing $1 million, will an insurer cover the cost?
- GM Food Adoption
Biotechnology is a developing industry and it’s expected that in the next few decades we will find new ways to enhance food yield, grow crops in some of the most remote areas of the planet and attune vital crops for hardiness. It’s a widely accepted fact that agricultural systems within developing nations will have to meet majority of the increasing food and industrial requirements of the population in the Lesser Developed Countries (LDCs) in the coming decades. For rice alone, it’s estimated that a 70% growth in productivity is essential by 2025 to cater to the growing demand. A major challenge thus is to ensure that the massive potential of biotech is directed to where it’s required the most, and that’s to benefit farmers and the population of the LDCs.
Biotechnology is now being used to produce genetically modified (GM) crops. To do this, scientists isolate a gene from a plant, organism or animal and splice it into others. Consequently, they are now hoping to achieve significant agricultural benefits like resistance to pesticides and herbicides, increase crop yields, and resistance to drought tolerance or disease. In the US, more than 88% of all the canola, corn, soy, cotton plants and sugar beets grown are genetically modified.
- Societal Concerns
The field of biotechnology is rapidly changing and fast-paced. Often, the rate at which new technologies are developed exceeds that of regulatory adaptation and change, which creates major biotech issues. This trait can be seen in those developments that have a direct impact on human lives through what we eat, drink and the drugs we take. Many regulators and scientists are aware of this dissociation. Hence, the rules for issues like patenting genetic inventions, new drug development, and stem cell research are constantly changing. The recent development of genomics and techniques for creating artificial genes present serious threats to humans and the environment in general.
Some societal concerns related to biotechnology are as follows:
- Environmental Harm
This concern is widely cited by those against genetically modified organisms (GMOs).
- Production/Laboratory Safety
It’s hard to safeguard oneself if he’s unaware of what he’s working with. There are some technologies, normally nonbiologicals that create commercial production lines even before they are tested for safety. Another concern is with regards to the safety of technicians in a laboratory even under protected conditions, especially when working with unidentified virulent organisms.
A dauntingly heavy number of biological toxins and infectious organisms could be used to attack animals, humans and plants. The most probable biothreats for humans rope in all branches of the microbial kingdom, which includes bacteria (plague, anthrax, tularaemia, brucellosis); rickettsia (Q Fever, Rocky Mountain spotted fever, typhus); viruses (dengue fever, influenza, small pox, haemorrhagic fever agents, encephalitis virus); toxins (Staphylococcal enterotoxin b, aflatoxin, ricin, botulinum); and fungi (coccidioidomycosis).
- Ethical Issues
Besides the old controversy of cloning genes being sacrilegious, many ethical questions stem on the suitableness of licensing genetic inventions and many other IP issues. Furthermore, the development of genes from scratch translate to the fact that at some point in time we might be able to create life from a chemical soup, which will go against the religious or ethical beliefs of a sizeable number of people.
- Other Challenges
Lastly, the biotech sector is confronted to other difficulties, especially when trying to roll out products on the market. In fact, similar to the pharma industry, the biotech industry faces four core challenges:
- Loss of patents, bringing competition from biosimilars
- High R&D costs
- Low R&D productivity
- A strong requirement of implementing M&A to strengthen the pipeline
In today’s context, there are some biotech firms trying hard to master the pharmaceutical value chain to raise the success rate of their product development. Because of a strong financial crunch and economic model, which is now changing, companies have now started to adopt an innovative model called Fully Integrated Pharma Companies (FIPCO). An important way to achieve this model is through a M&A strategy to assist biotech firms be perennial with long term goals and vision. Currently, around 60 out of 400 biotech companies have adopted this approach. Some of them include Shire, Gilead, Celgene and Amgen.
The methodologies used in the biotech industry have vast room for improvement considering that biotech is in its early stages. Pharmaceutical companies have recently started to make some major breakthroughs in incorporating biotechnology into their R&D processes. It’s not only human health, but agriculture and sustainability that have been addressed by this technology based on biology. We hope that in the near future we’ll be able to produce adequate quantities of pure, human-derived compounds and will be able to use these compounds to find out new and better therapeutics at a much reduced price.