How Big Pharma Gets Bigger, And What Little Pharma Can Do About It

By Louis Dematteis

With regulatory costs skyrocketing for biotech companies as FDA clinical trials continually become more onerous and expensive, it is the biggest companies with the heaviest cash flow that have the easiest time adapting, and the smallest ones with the least ability to jump government hurdles that suffer the most. Given the rich-get-richer environment this has fostered in the pharmaceutical industry, how can little pharma ever break through? Let’s begin with what is actually making the drug regulatory process so expensive in the last decade.

In an eye-opening piece published last April, Forbes breaks down the percentages of research and development costs for Big Pharma and how gargantuan these companies have become over the last 10 to 15 years. Most of these costs, writes the author Avik Roy, have to do with one specific aspect of the pipeline – phase III.

Overall, Phase III trials now represent about 40 percent of pharmaceutical companies’ R&D expenditures. But this often-cited statistic actually understates the gravity of the burden. This is because overall R&D expenditures include all pharmaceutical candidates that a company tests-including hundreds that never reach the Phase III trial stage. When we confined our analysis to those drugs that actually get approved, we found that Phase III clinical trials typically represent 90 percent or more of the cost of developing an individual drug all the way from laboratory to pharmacy.

Phase III trials have become bigger, more complicated, more restrictive, and more time consuming as the years pass. Why should this be so? Is medical technology really getting all that more complicated that progressively more restrictive phase III trials are the only thing standing between global health and a renegade pharmaceutical industry intent on poisoning the human race with wildly experimental drugs?

No. There are, in my opinion, two primary reasons that are opposite sides of the same coin. The first is that regulating and restricting and thereby being able to control entire multi-billion dollar industries by force is, for the average government bureaucrat, a total thrill…..

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