Innovation in the Biopharmaceutical Industry

The following sections are included:

• Contents

• Acknowledgements

• Introduction – Innovation in Health Care: The Engine of Technological Advances

The innovation process in the biopharmaceutical sector is influenced by long business cycles, multiple stakeholders and complex interactions. Early models of the innovation process are inadequate to capture the complexity of innovation in the life sciences sector. In particular, narrow classifications which describe innovations as “radical” or “incremental” are not particularly useful when considered in the context of the complex patterns of interrelated innovations observed in practice.

Many partial models of the innovation process which equate innovation to inventive research, patenting and product development fail to recognise that innovation is a cyclical and business-driven process and underscore the final phase of the innovation process, namely, achieving timely market diffusion and adoption of innovations to benefit patients and innovators. Innovation is sustained if it is appropriately rewarded. Investment in the science base alone without appropriate reward system for innovations is unlikely to promote renewed competitiveness in the European biopharmaceutical industry.

The last century has witnessed groundbreaking advances in clinical medicine across the entire diagnostic and therapeutic range, but inequities in access to these advances and innovations continue to be a major challenge to our societies.

Innovations are often initiated by “eureka” moments of discovery, but realising their full potential depend on a process of continuous incremental innovation and interaction involving complex networks. When developing systems that reward, encourage, and sustain medical advances, policy makers must recognise four important factors. First, “incremental” and “continuous” innovation is as important as “breakthrough” innovation. Second, investment across the entire innovation process is needed. Third, the ability of physicians to work across a wide range of scientific fields at “the bench and bedside” is critical to continuous innovation. And fourth, final medical advance that can result from an initial discovery may not be obvious and only occur following interaction with experts and innovations in other fields.

Great strides have been made in the field of cancer medicine towards understanding the fundamental biology of cancers. Impressive treatments have emerged, resulting in markedly prolonged survival for many patients. These advances mean that, within the next 20 years, cancer could become a chronic disease rather than a death warrant. But that promise depends on sustained investment in innovation, and on society's willingness to pay for that innovation.

Realising this promise might be a problem for Europe where investment in medical science remains low compared to the United States which is driving global innovation in cancer technology (providing 55% of global funding for cancer although it only has 5% of the global cancer population) and where innovation is rewarded.

If Europe is to continue to play a leading role in cancer medicine, it needs greater investment in R&D with an environment that supports and rewards innovation.

Empirical evidence demonstrates the value of intellectual property (IP) in creating economic growth, enhancing productivity and profitability, and increasing enterprise value. Research and Development (R&D) intensive industries, such as the life sciences, where patents are critical to competition, need an enabling environment to institutionalise innovation and IP generation and reward investments in IP.

The US has approached IP strategically and created an IP infrastructure. Japan aims to develop into an “IP nation”. China has an increasingly well-developed IP system. In contrast, the European Union (EU), which aims to become the world's leading knowledge-based economy, has a fragmented and expensive system of national patents. It lacks an environment which values investment in IP generation and management.

Until recently, the EU enjoyed global competitive advantage in the life sciences, but this advantage has been lost. To regain this competitive advantage the EU must invest substantially in R&D, IP generation and commercialisation of these outputs.

Multiple interacting factors influence the uptake and diffusion of medicines which are critical to improving health. However, there is a gap in our knowledge on how regulatory policies and other national health systems attributes combine to impact on the utilisation of innovative drugs, and health system goals and objectives.

Our review demonstrates that strong regulation adversely affects access to innovation, reduces incentives for research-based firms to develop innovative products and leads to short- and long-term welfare losses. Short-term efficiency gains from reducing pharmaceutical expenditures may actually increase total healthcare costs, reduce user choice, and in some cases, adversely affect health outcomes.

Decision makers need to adopt a holistic approach to policy making, and consider potential impact of regulations on the uptake and diffusion of innovations, innovation systems and health system goals.

Government support for partnering between BioPharma companies and universities is growing in the UK and some European countries but few studies have explored these partnerships.

Through interviews and a survey of key institutions we explored perceptions of key informants on industry and university partnerships. Study participants identified that partnering helped them to increase innovation in R&D and led them to adopt more open approaches to innovation.

Organisational structures to coordinate and support partnerships; flexibility in operational management to solve problems in establishing and running these partnerships; leadership, especially by investigators to champion and lead collaborations; developing organisational capabilities of universities; and creation of an enabling environment by governments were identified as the critical success factors for partnering. The challenges faced were identified as lack of funding for university research teams; pressure on pricing from industry partners; disagreements on IP ownership; asymmetry of industry and university capabilities in partnering; and lack of administrative support with excessive bureaucracy from universities.

The following sections are included:

• Index