The relationship between biologicals and innovation

Abstract

There are no two European countries with the same – or even similar – health care systems. But they share one common denominator: in all European countries the costs for health care keep on rising faster than their GDP. The growing number of elderly people and the related extra claim to the system can only partly explain this cost increase. There are other drivers as well. Although the increasing use of generic drugs tends to reduce the cost of medicines, there is an upward pressure through the category of novel medicines, in particular biologicals: medicinal product made through recombinant DNA technology. In the list of 10 best-selling drugs (total sales 75 billion US$ in 2013), 7 out of 10 are biologicals. All 7 sell between 5 and 10 billion US $ per annum. These biologicals are used to treat serious, often life-threatening diseases, such as cancer and diabetes. And the price for the annualised cost of treatment per patient can be as high 100,000 Euros or even higher. To explain the high prices of biologicals, two arguments are being used: I) these products are very costly to produce, because of the complex manufacturing process including downstream processing, and /or II) the cost for innovative drug product development is high: 4.2 billion+ euros (period 2006-2012) for a successful product including the money to be recouped for the many failed drug products in the pipeline (‘attrition’) (PWC, 2012). And, somebody has to pay the bill. In the following I will demonstrate that the manufacturing costs argument is incorrect and that indeed ‘big pharma’ is –for now- still profitable because of these highly successful biologicals. But there is more to it.