With colossal research costs and budget pressures on health services, the pharmaceutical industry is facing major challenges, amid fears its public reputation has declined.

FOR YEARS, the rise in medical costs internationally has run far ahead of inflation, as new equipment and state-of-the-art drugs improve patients’ chances, but leave national health systems struggling to pay the bills.

Now, a little-noticed revolution is taking place in the global pharmaceutical industry, where executives are taking a root-and-branch look at the costs of their research arms: ones that often consume billions of euro every year.

The review has already led the US multinational Pfizer to announce it will cease research and development in Sandwich in Kent – the place where Viagra was first discovered – with the loss of most of its 2,400 highly skilled jobs unless the 50-year-old centre can be put to use by others.

Industry figures gathered last Thursday in the Dorchester Hotel in London to debate the need to “reinvent Pharma for a new generation”, one where the drugs companies will find it increasingly hard to get a return on years of patient research.

Warning that pharmaceutical research must change, John Lechleiter, chief executive of Lilly, which has a plant in Kinsale, Co Cork, said: “Our industry is taking too long, we’re spending too much and we’re producing too little.”

The difficulty is that too much of the fruit of current research offers “incremental” improvements in patient care, rather than past days where revolutionary new treatments marked, often, the difference between life and death.

Nycomed chief executive, Hakan Bjorklund said “everything” in the industry is now “being dwarfed” by the costs of innovation. “How many breakthrough products have you seen in the last decade? Only a handful.

“Ground-breaking innovation is rare and the cost of incremental innovation is much higher for us than it is for other industries,” said Bjorklund, who leads the €3 billion-a-year Zurich-headquartered company.

Health services are increasingly reluctant to pay a premium for products that offer marginal, but, nevertheless, significant improvements in care, said Bjorklund, citing his own company’s recent experience with one product.

Nycomed developed nasal-delivered morphine pain relief, which could offer ease to dying patients within five minutes, rather than in 30 minutes as happens with orally administered morphine which might work when the pain has gone.

“In some places they were willing to pay for it. Elsewhere, they don’t. From a price point of view, we can’t compete with oral morphine. This really worries me if this is the attitude that we are going to face in future.

“Somebody must pay for innovation at the end of the day. If there isn’t, then this will lead to more closures of RD facilities,” said Bjorklund, before later adding, “If people think we are going to continue with products without getting paid for it then they are in a for a nasty surprise.”

Illustrating the scale of the risks involved, Bayer HealthCare executive Kemal Malik said his company had invested hugely in researching an anti-coagulant drug before they knew it would work. “There would have been a €2 billion loss, if it hadn’t.”

Now, however, the industry is concerned that its reputation has been damaged in recent years, where people have become doubtful in the wake of a series of multibillion lawsuits. Just 11 per cent of those polled by Harris in the US said they believed it is trustworthy.

“Why are we lacking in trust? We have laudable mission statements. We were in a position once where we were a trusted industry. That is not the case now. The Harris poll is a wake-up call,” Malik declared.

The industry must work together with patients to persuade health services that the new products being developed offer a sufficient improvement in care to warrant the expense, Malik told delegates.

But not all patients have the same clout. HIV sufferers were able to prod both the industry and national health services into paying for new treatments because they were organised and had a powerful voice.

“They were able to drive research. Terminally ill patients do not have the same influence. Multiple sclerosis sufferers are the same. There are areas where the patient will not have a voice,” he told the conference.

Equally, however, patients have to do more to ensure that costs are minimised, said Patrick Flochel of Ernst and Young’s life-sciences division. “Ten per cent of emergency room costs are down to patients not taking their medicines.”

Intervening, one German delegate said: “In Germany, people smoke, eat bad food, take no exercise and then they are surprised when they get sick. And then it is the government’s fault. People are firstly responsible for their own health.”

The changing world offers opportunities and challenges for the Irish pharmaceutical industry, said the head of the Industrial Development Authority life sciences division, Dave Shanahan

“International regulators have become more risk-averse. The [Food and Drug Administration] in the United States has become completely risk-averse. New products have positive effects, but they also have side-effects. That is true for every single medicine. They are not natural, since they shouldn’t be in the body in the first place.”

The future for the Irish industry lies in deepening the relations with Irish colleges and universities and moving quickly to bring research generated in both to the market, along with findings ways in Irish pharmaceutical plants “of doing things better – and we are good at that”.

Science Foundation Ireland, he said, has brought the quality of Irish research in general “from nowhere to world-average” in a decade, while Ireland would now be regarded as first for genetic research and third for immunology.

But much of the progress to be made in coming years will be achieved in finding new ways of using drugs that have already been given regulatory clearance: “That is a much better focus than trying to split the atom,” said Shanahan.