Biotechnology in a Global Economy.  Congress of the U.S. Office of Technology Assessment (OTA).  1991. 

 

Chapter 5:  The Pharmaceutical Industry

 

Dedicated Biotechnology Companies are biotechnology companies devoted to examining the potential for the commercial development of biotechnology.  Many focus on developing biotechnology based pharmaceutical products for a niche market and have a strategic alliance with multinational corporations.  (p. 73)

 

Drug development in the post WWII era was largely speculative and based on the mass screening of chemical compounds.  The advances of the biological sciences provided information on the molecular and cellular level, which increased the understanding of the relationship between chemical structure and biological activity. (p. 73)

 

ÒBiotechnology is likely to be the principal driving force for the discovery of new drugs as we enter the 21st century.Ó (p. 74)

 

Conventional screening is the traditional approach to the research and development of new drugs.  It includes the continued research of existing products, the investigation and characterization of natural products, and the screening of synthetic chemicals and compounds for medicinal or pharmacological activity. (p. 74)

 

Rational drug design is characteristic of the drug development efforts of biotechnology companies.  Rational drug design depends on an understanding of the physiological basis of disease.  Research concentrates on the activity of enzymes, hormones and hormone receptors, cell replication and protein synthesis, and other molecular-level activity.  Rational drug design is largely dependent on rDNA and hybridoma technology, research tools developed by biotechnology. (p. 74)

 

There are 2 basic approaches to the use of biotechnology in research and development efforts:  the production of new drugs through use of rDNA techniques to manufacture unmakeable human proteins, and the design of synthetic molecules such as cloning to express genes that produce receptors that can then be used to screen for receptor-binding compounds. (p. 74-5)  

 

The FDAÕs final policy statement regarding biotechnology is that it would not classify rDNA or hybridroma technology derived products any differently then products already covered under existing statutory provisions and regulations for human use. (p. 75)

 

Companies access foreign markets by licensing marketing rights for their products to local companies, acquiring local companies through buy-outs and mergers, and constructing new facilities abroad. (p. 83)

 

Marketing costs represent 24% of drug revenues. (p. 83)

 

In 1989 the pharmaceutical market grossed $150 billion.  The U.S. had the largest share of the international market accounting for 30% of it.  The European community had the 2nd largest share in the international market; however, Japan had the 2nd largest single country share accounting for 17.6% of the international market. (p. 85)

 

The pharmaceutical industry is experiencing a period of consolidation and outsourcing to small biotechnology firms.  Very few biotechnology firms have a fully integrated structure and are able to bring products to market; most rely on multinational pharmaceutical corporations. (p. 87)  

 

Ortho Biotech, a subsidiary of Johnson & Johnson, has research agreements with biotech firms Xoma and Amgem. (p. 87-8)

 

Roerig, a subsidiary of Pfizer, has a research agreement with Xoma. (p. 87-8)

 

Merk has research agreements with biotech firms Genetech, CA Biotech Inc, Immunomedics, Repligen, and Chiron. (p. 87-8)

 

Hoffman-LaRouche has research agreements with biotech firms Cetus Corp and Genetics Institute. (p. 89)

 

SmithKline Beechman signed a research agreement with Nova Pharmaceuticals and T Cell Sciences. (p. 89)

 

There are many types of strategic alliances between biotech firms and multinational pharmaceutical companies:  there are agreements to exchange technology, joint ventures, equity arrangements, and research and development contracts.  The most common contract between multinationals and biotech companies are licenses that include joint product development and marketing rights.  (p. 88) 

 

Sandoz has a $30 million investment in the biotech firm Cytel. (p. 89)

 

Ciba-Geigy has a large investment in the Texas-based biotech Tanox Biosystems. (p. 89)

 

Glaxo has a $20 million investment in the biotech firm Gilead Sciences. (p. 89)

 

Bayer has a biotech research budget of $100 million. (p. 89)

 

Ciba-Geigy created a $60 million biotechnology research unit. (p. 89)

 

Roche, in addition to buying out Genetech, spent $130-140 million on biotechnology research in 1989. (p. 89)

 

Sandoz expected to invest $150 million in biotechnology research in 1991 and up to $1 billion in 1995. (p. 89)

 

Japanese companies are entering into the U.S. market through investment in dedicated biotechnology companies.  Chugai Pharmaceuticals has agreements with Genetics Institutes and Upjohn and recently acquired Gen-Probe for $110 million.  Tokyo Institute Immunology has a $20 million investment in IDEC pharmaceuticals.  Genetics Institute collaborates with JapanÕs Yamanouchi Pharmaceutical. (p. 89)

 

Biotechnology is commercially viable due to federal funding of research, in particular, University scientists.  There is a great deal of technological transfer between Government labs, Universities, and industry. (p. 89)

 

The Drug Export Amendment Act of 1986 allowed for the export of new drugs not yet FDA approved to 21 foreign countries.  (p. 91)

 

The 1983 Orphan Drug Act was passed to entice pharmaceutical companies to develop drugs for rare diseases.  The Act offers grants, tax breaks, and 7yr market exclusivity to the 1st manufacturer to gain FDA approval.  Through this Act, Amgen sold $300 million worth of EPO, an orphan drug developed for dialysis patients and covered by Medicaid.  (p. 92) 

 

The Drug Price Competition and Patent Term Restoration Act of 1984 was established to extend the patent of a new drug.  The extension granted by the Act is 7-10 yrs, or the total time it takes the FDA to review the drug application and ½ of the time spent in clinical trials. (p. 93)

 

Roche Holdings ltd, a Hoffman LaRoche subsidiary, bought the biotech start-up Genetech.  (p. 82)

 

Johnson & Johnson has 175 operating units spread throughout 55 countries. (p. 82) 

 

Merk has research labs in 7 countries, experimental farms in 6 countries, and manufacturing plants in 18 countries.  (p. 82)