On the Cutting Edge

By Sander A. Flaum, MBA, Principal, Flaum Navigators, Advisory Board Member and Executive-in-Residence, Fisher College of Business, The Ohio State University 

Naming a column the “Cutting Edge” in these times may seem presumptuous. Not too long ago, “cutting edge” meant the cusp of innovation, the tech pathway to fantastic discoveries and business success. Who wouldn’t want to be out there? Today, the cutting edge we’re facing is like something out of a horror film – a whirling relentless blade that’s lopping off established institutions with relentless energy and unprecedented speed. Workplace? What’s that? Workforce? Who are they? Economy? Who knows?

I see this column as a sounding board for discussing this evolving social and economic upheaval and debating how we as pharmaceutical and biotech professionals can survive, if not manage the trends. As readers of this journal, you represent our industry’s established leadership as well as its rising stars. Your actions and input in this critical time will define our future. 

For decades, our industry’s success has depended on a model that traditionally rewarded advances in chronic and acute diseases and more recently in previously neglected “orphan” diseases. We invest heavily in R&D, hoping to realize profits that would reward stockholders, and, more important, fund future research. Despite past sniping from some critics, this model has remained financially viable because insurance, both public and private, could ensure that virtually all patients could access treatment. Over the years, the U.S. pharmaceutical industry has increased longevity and improved quality of life for hundreds of millions of people around the world.

Unfortunately, a major deficit in our performance has become apparent. Our absolute reliance on profitability may lead to actions that run counter to public interest. For example, cost pressures have led many manufacturers to outsource their supply chain, sometimes with dramatic impacts on quality. As many standard IV drugs became unprofitable to market, they have been simply discontinued, leaving hospitals to contend with dangerous shortages. As emerging drug resistance transforms once-benign pathogens into killers, we are learning that new antibiotics are difficult to make and unwieldy to price. Most recently, we were caught off guard by the COVID-19 pandemic and have fumbled in our attempts to provide treatments, vaccines, tests or even protective equipment. Anticipating and preparing for global health emergencies is not in our current wheelhouse. 

Here’s an idea I’ve seen in the press. What if the federal government offered to subsidize and reward pharma and biotech manufacturers for developing innovative vaccines, tests, and treatments for emerging or even potential diseases? Prizes and milestone payouts could be structured similarly to the way the Pfizers and the Mercks reward their independent R&D partners. With billions of dollars available for success in designated therapeutic categories, participating companies would sign over any patents and agree to supply products based on negotiated prices. 

The point is that by making clinical achievement the sole criterion for financial success, participating companies would not have to rely on high prices and exclusivity to justify their research, nor would they shun therapeutic areas unlikely to generate sufficient revenue. 

I confess that I distrust the idea that a government agency can effectively set targets for medical research and manage drug development. Although the NIH and other government institutions are invaluable for funding basic scientific research, they have traditionally left translational development up to private industry. But who knows? Perhaps there is a room for a federally funded option to protect society as a whole against medical disasters. 

What do you think? Should we in pharma be open to government support for financing the R&D needed to prevent or manage future pandemics? Should developing the next generation of antibiotics be a Federal moonshot? I’d love to hear your thoughts at [email protected].