[Ip-health] Matthew Herper in Forbes: Bernard Munos has a radical idea to save the drug industry: Take bigger risks and cut R&D

Jamie Love james.love at keionline.org
Thu Feb 9 10:54:09 PST 2012


Rallying Pharma's Rebels
By Matthew Herper, in Forbes

>From the 08.22.11 issue of Forbes Magazine: Bernard Munos has a radical
idea to save the drug industry: Take bigger risks and cut R&D.

It’s no secret that the pharmaceutical industry is suffering. With too few
breakthroughs and stagnant finances, the stocks of some of the industry’s
biggest players, including Pfizer and Merck, are down 40% from a decade
ago. The industry has cut 300,000 jobs in the last ten years as the number
of new drugs making it to market slowed to a trickle.

Bernard Munos, 61, who worked in sales for 30 years at Eli Lilly, has spent
the past decade studying pharmaceutical innovation. He thinks he has an
answer to what ails Big Pharma: Cut research and development.

That’s just part of his prescription for changing how medicines are
invented. Munos says the drug industry needs to spend research money in an
entirely new way. Instead of chasing improvements to blockbuster drugs that
help lots of people a little bit, it should focus on true breakthroughs
that help patients a lot. And rather than do the research in-house,
companies should close their labs and outsource the work to tiny, nimble
startups that can explore bigger, crazier ideas.

“You cannot script innovation,” Munos says. “You cannot boil it down to a
code of best practices. Because it is unpredictable and the opportunities
in science do not match the opportunities in markets.”

Munos’ scorched-earth scheme is radical, but he’s fast gaining followers
among a generation of entrepreneurial bioscientists fed up with the way the
corporate world makes drugs. Corey Goodman, a former Pfizer executive and
founder of biotechs such as Exelixis, a drug developer, and Second Genome,
a genetics firm, is one of them. “These are things that the management of
all the top companies knows,” he says. “Bernard put on the table that we
don’t just need a Band-Aid. We need transformational change.”

At first glance Munos seems an odd revolutionary. After starting out in
animal health, he helped restructure Lilly’s business in Latin America. He
pioneered new ways of doing market research, then ran sales in Portugal,
where his team broke sales records. He led marketing organizations in
Eastern Europe and in Russia before returning to the U.S. as a special
advisor to Lilly’s top executives.

Read More:Rallying Pharma’s Rebels|The Best Drug Companies Of All Time|The
Best Drug Companies Of The Decade|7 Steps To Pharma Innovation|6 Pharma

But after decades of fixing broken divisions and auditing managers, he was
bored and yearned to address questions that had been “burning my tongue for
years.” What was wrong with research? Why was productivity plunging as
expenses soared? “We spend billions each year to get innovation, but where
does innovation come from, and how do we get more of it?” asks Munos. “No
one had a clue. Crude ideas about innovation pervaded not only the company
but also the industry. This is an industry that spent tens of billions of
dollars to create innovation but had not created tools to measure it.”

Looking for answers, he started pulling data from the Food & Drug
Administration, from company filings with the Securities & Exchange
Commission, from any other source he could find. After a decade of digging
he’s come to the conclusion that the pharmaceutical industry “is imploding
in slow motion” and could fail completely unless it adopts a whole new
model of drug development.

Next: A New Model Of Drug Development

Munos’ first scientific paper, in 2006, was published in Nature Reviews
Drug Discovery. It explored how the kind of open-source work that helped
Linux become a credible threat to Microsoft Windows could also aid drug
development. He acknowledged that unlike programmers, who need just a
laptop, drug researchers needed laboratories and clinical trials, which are
expensive. But he recommended that drug companies try making their
resources available to outside scientists. Lilly actually tried this,
screening 32,000 potential new drugs in 18 months. It wound up ­licensing
three of them for further development.

But it was a 2009 paper that galvanized followers. Munos analyzed the
records of more than 1,200 drug approvals going back to 1950. He found the
amount of research money spent for each new drug approved has been
increasing exponentially for years. In the 1970s for every $100 million or
so drug companies put into research a new medicine would emerge. By 1990
this figure had risen to $500 million, and it has accelerated ever since.
Munos says it hit $4 billion by 2009—and it is now careening toward $10

Yet there appears to be little correlation between cost and success. A new
antibiotic invented by Optimer Pharmaceuticals cost only $175 million to
develop this year. Pfizer tripled its R&D budget over the past decade—to a
peak of $7 billion in 2006, more than any other company in the world—while
the number of new medicines it brought to market declined. From 2001 to
2010 Pfizer brought to market only four drugs it had invented in its own

So how can companies avoid tossing away billions on medicines that won’t
work? By picking better targets. Munos says the companies that have done
best made very big bets in untrammeled areas of pharmacology. Merck is the
alltime champ, launching 56 new drugs since 1950. Its successes included
the first statin cholesterol drugs Mevacor and Zocor, the first mumps
vaccine and some of the first HIV drugs. At its peak it was run by a
scientist, Roy P. Vagelos, who had previously served as its head of R&D and
who deliberately avoided me-too drugs.

Novartis adopted such a breakthrough-focused model in the 1990s and has
launched 17 drugs in the past decade, 7 more than any other drugmaker. Part
of the reason was former chief executive Daniel Vasella, a doctor who Munos
says “understood what a breakthrough medicine was.” His central success was
Gleevec, a treatment for a rare cancer. There was strong evidence it would
work from the start, but the limited market worried company bean counters.
Vasella pushed its development anyway. Gleevec became a $5-billion-a-year
seller because of its $40,000 annual price and because it extended patients
lives so much. Vasella left the CEO role last year.

Munos also showed that mergers—endemic in the industry—don’t fix
productivity and may actually hurt it. The 30 such deals done over the past
60 years didn’t boost research results at all. What correlated most with
the number of new drugs approved was the total number of companies in the
industry. More companies, more successful drugs. It didn’t matter how much
they were spending. Munos thinks this is because individual companies must
try new things to survive and risk breeds results.

This led to Munos’ most radical insight: Why keep researchers in house? Why
not force them to form tiny companies of their own and outsource work to

Lots of people don’t like this idea, among them Joseph Jimenez, the current
chief executive of Novartis. “Many companies are outsourcing R&D, or
they’re cutting R&D significantly, and we don’t believe that is the right
path,” he says. “The right path is to build capability in discovery and
development, and strengthen our lead in innovation. It’s fundamental, it’s
strategic, and we’re going to be the best in the world at it.”

John LaMattina, a senior partner at PureTech Ventures and a former head of
R&D at Pfizer, agrees and says Munos’ approach is dead wrong. Research is
actually improving, he says, with more drugs approved so far in 2011 than
in all of 2010. Big, risky projects often blow up after billions of dollars
have been spent. And some of the biggest successes, like Lipitor, were
me-toos. “You can’t just be external,” he says. “You’ve still got to have a
core of internal scientists.”

Next: Winning Converts

But drug companies like Pfizer and Sanofi-Aventis seem to be listening to
Munos, gingerly cutting R&D spending and trying to build outside networks.
And a new generation of small firms are sprouting up to take on the work
(see box, right).

It’s invigorating for researchers like Tom Hughes, who developed ­diabetes
drugs at Novartis before ­becoming chief executive of ­Cambridge,
Mass.-based Zafgen, a company developing weight-loss drugs that work by
making the body burn more energy. His entire company is only three people.
“If you had asked me five years ago I would have told you this would be
impossible,” says Hughes. He doesn’t miss the “enormous inertia” of a big
company and days wasted in meetings. “It is completely liberating. I’ve run
very large groups, and I’ve enjoyed that, but when it comes to trying to
prove a medicine, having the freedom to do what we need to do is

Munos is thinking even bigger. He points to the Pentagon’s Defense Advanced
Research Projects Agency, the innovation engine of the military, which
developed GPS, night vision and biosensors with a staff of only 140
people—and vast imagination. What if drug companies acted that way? What
areas of medicine might be revolutionized?

Munos retired from Lilly last year to start his own consulting business.
He’s hopeful that Big Pharma is listening and will save itself. “You can
change the world on a shoestring,” says Munos, “but you have to do the
right things.”

Read More:Rallying Pharma’s Rebels|The Best Drug Companies Of All Time|The
Best Drug Companies Of The Decade|7 Steps To Pharma Innovation|6 Pharma

This article is available online at:

James Love.  Knowledge Ecology International
http://www.keionline.org, +1.202.332.2670, US Mobile: +1.202.361.3040,
Geneva Mobile: +41.76.413.6584, efax: +1.888.245.3140.  Sometimes I am
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