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PharmaDeals Business Commentary

Risk and Reward (2005-03-01)

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No one can doubt that the pharmaceutical industry is facing one of its toughest challenges. The events rolling out before us are challenging to say the least. There was a time when once a drug reached market its risk profile changed dramatically. Most of the earlier risk had been removed and the years following launch would be measured in terms of the degree of upside rather than downside. The events surrounding Vioxx have probably changed this situation forever.

Everyone, including the pharmaceutical industry, wants safe drugs. The overwhelming majority of people in the sector are proud to be associated with one that can actually improve the quality of life. Thanks to the way it has evolved and the way it is regulated we have developed a very effective way of discovering and developing drugs that can fundamentally change the outcome of disease and provide hope for millions of sufferers around the world. This evolution is no accident. Without the protection of ideas through rights to intellectual property (IP) and the evolution of early- to late-stage capital markets, the development of some of today's ground-breaking drugs would never have occurred.

"With risk increasing by years beyond the day of launch there is now an even more compelling reason to increase the patent life of drugs - and by at least another 5 years."

On average 80% of drugs entering clinical trials fail to make it to market. The 'Vioxx effect' now means that drugs that do make it can no longer be perceived to be as secure as they were in the past and, to be frank, quite rightly so. Our industry operates, and has always operated and managed, the game of risk. What is important is that those who take risk should be rewarded for taking that risk. This is not just a philosophical point, it is essential if we want the powerhouse of research and development to continue to generate safe and effective drugs. The costs of development are increasing and will continue to do so as the rigours of the various regulatory bodies increase, so in order to maintain the desire for companies to discover and develop drugs against a backdrop of increasing risk, the rewards must be clear. There are two ways to provide reward: one is through the price of the drug, the other is through the protection of rights to IP. Pricing is very drug specific and requires separate discussion. However, IP is key to all drugs and is an essential component of ensuring reward to innovative companies. With the risk increasing by years beyond the day of launch, there is now an even more compelling reason to increase the patent life of drugs - and by at least another 5 years. This would mean that drugs that are safe and effective are protected for longer. Such a move would restore confidence to an industry that needs a boost to its preparedness to take on risk.

Fintan Walton

Chief Executive Officer

PharmaVentures Ltd