February 2011

The following op-ed by Paul Pescatello, president and CEO of CURE, appeared in the Hartford Courant February 13.

Keep Connecticut Open for Business
Despite Pfizer Defection, Don't Count Biopharma Out

Pfizer's plan to move important research projects from Groton to Cambridge, Mass. — reducing its Connecticut workforce from a high of almost 6,500 to 3,300 — raises questions. Should the state have done something to stave off Pfizer's decision?

Pfizer's strategy was driven by forces largely outside the state's control: the high-reward-but-high-cost biopharma business model, a number of research bets made in Pfizer's labs that didn't pan out, and the burdens of federal policy.

The biopharma business model is unique because medicine development is so costly. It takes upward of 15 years and $1.5 billion to bring a medicine from idea to FDA approval. Only one in 10,000 reach the market. Pfizer has had more than its share of successes. Hugely profitable Lipitor — the "bad" cholesterol-lowering medicine — is noteworthy.

Torcetrapib, a compound designed to help raise HDL — "good" — cholesterol and melt arterial plaque, however, was a costly disappointment. Pfizer spent more than $2.5 billion to refine the compound and conduct clinical trials. After a decade developing Torceptrapib, Pfizer had hit a dry hole.

Behind every Lipitor is a legion of Torcetrapibs. Lipitors support scores of research projects, the hiring of thousands of workers and the building of research facilities. Pfizer's Lipitor patent expires this November and there is not enough in the pipeline to replace the revenue.

Pfizer is not alone in facing new medicine development headwinds — it's an industry-wide challenge. Breakthrough medicines, such as Lipitor in the 1980s and '90s, were relatively easy. Finding drugs to combat diseases such as Alzheimer's, Parkinson's and cancer is significantly more complex.

Federal policy exacerbates the challenges of biopharma research and development. First, demagoguery about the cost patients pay for new medicines and the need for generic drug makers weakens incentives to invest in drug development.

It's common sense: if a generic drug maker can access the intellectual property and clinical data a biopharma company has amassed, it can charge a lot less for its copy of the innovator's medicine. We seem to want biopharma industry to develop treatments and cures but then we don't want to pay for the work.

Second, the FDA's risk aversion hinders drug discovery. The agency requires extensive clinical trials that add enormously to the cost of drug development while producing little statistically significant information.

Two Connecticut companies, MannKind Pharmaceuticals and Biodel, each with novel insulin therapies for diabetes, have been hobbled by FDA demands. Indeed, MannKind converted a factory in Danbury into a state-of-the-art insulin manufacturing facility. But it's idle as the company labors to meet newly conjured-up FDA demands.

Finally, the Affordable Healthcare Act, ironically, slows biopharma innovation. The law involves a complicated administrative roll-out requiring years of federal and state agency rule-making. Biopharma medicine development slows as companies and their investors wait to see what it will cost and what they will be able to charge for medicines.

Given all the things roiling the fortunes of Pfizer and biopharma in general, how should Connecticut react?

First, don't count biopharma out. The explosion of information about the biochemical mechanisms of disease and the human genome will lead to new classes of medicines and therapies.

Second, biopharma is still a good investment. No industry invests or exports more. It creates jobs with robust benefits that aren't easily outsourced. The industry's vast capital outlays for research and development mean huge spending within a state.

Third, resist calls to scale back the incentives that promote research and development. Connecticut's research-related tax incentives help fend off competitors, whether Boston or Shanghai.

The most important predictor of where a biotech company will locate is proximity to the intellectual property that is its reason for being. Bolstering our research universities with our stem cell program, for example, stimulates biotech growth.

In addition, Connecticut should spread its investment risk. There are political advantages to allocating scarce state funds to snag one big employer, but the fates can be unkind to any single company. Creating an environment friendly to start-up businesses is better — long term — at creating jobs and a strong economic base. The more investments in start-ups, the more likely we are to spawn a breakthrough company.

Finally, biopharma companies want to be part of the intellectual ferment of numerous start-ups, larger established companies, hospitals, universities and research institutions. Pfizer's tilt toward Cambridge demonstrates this trend. We should concentrate our resources where natural clusters exist. For biopharma, this means New Haven. Tellingly, Pfizer, after all its restructurings, has not entertained moving its New Haven clinical research unit. It's a few blocks away from a score of biotechs, Yale Medical School and the recently opened Smilow Cancer Center.

Paul R. Pescatello is president and CEO of Connecticut United for Research Excellence, based in New Haven.

Link to online version.