OF THE 13,000 IDENTIFIED DISEASES WHICH COULD AFFECT A HUMAN, ONLY AROUND 500 ARE CLASSED AS CURABLE. MANY EVEN LACK A DIAGNOSTIC TEST
THE INNOVATION DROUGHT
Despite all these innovations and continued rises in Research and Development (R&D) spending, the pharma industry suffered an innovation drought in the first decade of the 21st Century. Between 2005 and 2010, the average number of ‘new molecular entities’ approved by US regulators was just 21.8. To put this decline in context, there were as many as 53 new drugs approved in the USA in 1996.
The drought in innovation coincided with a number of successful drugs coming off patent. This resulted in a ‘patent cliff’, where big pharmaceutical companies lost market exclusivity on some of their best selling treatments and failed to develop new drugs to offset the decline in revenue. Share prices in the healthcare industry stagnated before declining sharply towards the end of the decade.
THE BIOTECH BOOM
In recent years, we have seen a revival in the prospects of the healthcare sector, spearheaded by an innovative category of drugs know as biologics. While traditional drugs are chemicals synthesized from other chemicals, biologics are derived from living cells. They have the potential to offer more targeted treatment than conventional chemical drugs but tend to be much more expensive due to the complex manufacturing process.
This new category of drug has proven extremely lucrative for the healthcare industry. AbbVie’s Humira, a biologic medication used to treat rheumatoid arthritis, generates revenues in excess of $10bn a year. The next big leap forward which the industry is pursuing is gene editing – the ability to insert, delete or replace parts of a human’s DNA, potentially curing a series of diseases related to fundamental faults in an individual’s genetic make-up – this will not come cheap, however.
Despite the excitement surrounding the potential of biotech and gene editing, the healthcare share index has been relatively weak following increased focus on the industry linked to a Tweet from Hillary Clinton in which she pledged to combat the high cost of prescription drugs in the US, sparked by an egregious price rise on an HIV drug. Pharma companies bounced strongly after Donald Trump became President-elect.
In response to this, the healthcare industry cites the high levels of investment they make in R&D and the time it takes to get a product to market. Indeed, almost half of all corporate research and development spending in Britain this year has been carried out by the pharmaceutical and healthcare industry.
More conflicts over pricing look certain as governments and insurers battle to contain rising healthcare costs from an ageing population.
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