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The business challenges of drug development

The development of a new drug is a long and arduous process.  Discovering a new drug has been compared to looking for a needle in a haystack; it entails the development and testing of thousands of compounds before finding one that may achieve the targeted results.

There is no single path to finding a new drug; often it is a matter of pure luck.  The general process starts with studying the basic body functions both normal and abnormal.  If the drug is capable of changing the body functions it is a viable product.  The next step is to study how the drug might be used to treat or cure the disease or condition.

Diseases are complex processes and have a sequence of events.  The disease has to be broken down into its components.  These components are then analyzed at the cellular and molecular levels.  Based on this research, a particular step is selected as a target for the drug development; the goal is to correct the cellular or molecular dysfunction.

Frequently a computer is used to simulate an enzyme or other drug target and to design chemical structures that might work against the target.  Enzymes will work when they attach to the correct site on a cell’s membrane.  The computer can be used to show scientists what the receptor site looks like and how a compound should be prepared in order to prevent the attachment of the enzyme to the site.

Even with the use of computers it is necessary to do animal testing to answer questions such as:  How does the body react to the drug?  Does the body affect the drug?  How is it absorbed?  How much gets into the blood?  Depending upon the results, it may be necessary to modify the compounds.

Many drugs have been dropped or fallen away by the time the animal testing phase has been reached.  The drug may have bad side effects, it may not be easily absorbed, it may be toxic, and so on.  Sometimes an abandoned drug may be brought back years later to test for a different illness.

If the pre-clinical tests finally suggest a successful drug it must be tested in people.  Finally the FDA must approve the test results.  The FDA does not get involved at the early stages but it gets involved after the animal testing has been completed and the drug is ready to be tested on humans.  The FDA testing and approval process could take two or more years.

The cost of developing a new drug has been estimated to be between $379 million and $500 million.  Of 5,000 drugs that are initially screened, only 250 or 5% will be considered for pre-clinical trials.  Of these, only five will go through clinical trials.  If these, only 1 will be approved for sale.  Thus the probability of a drug that has been screened making it through human testing and into the market is about 1:5,000 or about .002%.

About the author

Dr. Jerrold Katz, a respected economist, was a founding professor of Simmons Business School, and has taught at several universities.  His firm, J.P. Katz | Business Damages Computation provides a variety of business valuation services for tax and legal purposes.



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