New Prescription

New Perscription
Spring 2017
Canada first became a player on the international pharmaceutical stage when Frederick­ Banting and Charles Best developed insulin for diabetics in the 1920s.

Humanity’s search for medicinal agents undoubtedly extends into our prehistoric past. Only since the 19th century, however, has this endeavour taken on the full trappings of scientific investigation. While plenty of diseases continue to afflict us, a huge portion of the world’s population now enjoys an unprecedented quality of life in terms of health, for which drugs often deserve a significant part of the credit.

University of Toronto researchers Charles Best and Frederick­ Banting­ saved the lives of countless diabetics with their discovery­ of insulin in the 1920s.

University of Toronto researchers Charles Best and Frederick­ Banting­ saved the lives of countless diabetics with their discovery­ of insulin in the 1920s. Photo credit: University of Toronto

Such progress sometimes began with a comparatively simple innovation, such as the extraction of acetylsalicylic acid from willow bark to create Bayer aspirin, or the powerful anti-cancer drug Taxol, initially derived from the bark of the Pacific yew tree and subsequently licensed for production by Bristol-Myers Squibb.

Bayer and Bristol-Myers Squibb are among a handful of long-lived pharmaceutical manufacturers that now dominate this sector of the economy. They are, in fact, the survivors of a dramatic shift in the business model of drug manufacturing during the 20th century. Prior to the First World War, a variety of smaller companies supplied the basic ingredients of various compounds, which were combined locally at pharmacies. This approach changed as post-war chemical engineering techniques made it far more cost-effective to produce patient-ready drugs for distribution from a few central locations. Smaller companies that could not make this transition fell by the wayside or were acquired by major corporations. 

The research and development associated with pharmaceutical materials has similarly evolved. Among the iconic examples of such work is the discovery of insulin in the 1920s, a time when diabetes was likely fatal. University of Toronto investigators Frederick Banting and Charles Best began to produce insulin for distribution to patients. As the medical impact and commercial potential of this discovery became apparent, the firm Eli Lilly partnered with the university to scale up manufacturing for a global market.

Canadian school children are taught this story as a way of illustrating how the country’s scientific talent has contributed to health care. Unfortunately, it represents a rare exception to the way in which the process usually occurred. As drug manufacturing became concentrated in fewer corporate hands, these organizations preferred to keep most of their research in-house, rather than rely on outside academics whose findings could be published and become available to competing firms. 

Regimes of secrecy and patent protection came to dominate the drug development process, one that regularly excluded scientists at universities and hospitals who might be working on the same problems. Such isolation of their R&D efforts may have been economically advantageous but it took a toll on pharmaceutical companies. In the absence of peer review and collaboration within the larger scientific community, elaborate internal review mechanisms replaced these open processes. It turned out to be an expensive system to establish and even more expensive to maintain. These costs could only be withstood if the end result was exclusive access to a highly profitable, mass-market drug. For several decades this outcome was obtained often enough to allow these giant enterprises to thrive. But as the 20th century closed, the rewards became fewer and further between while the costs grew relentlessly, ultimately forcing a radical transformation of the entire sector. “Until a few years ago, the business models of drug companies — in Canada and elsewhere — focused on internal drug development processes,” says Declan Hamill, vice-president, Legal, Regulatory Affairs and Policy with Innovative Medicines Canada. “That model worked very well for quite a long time but for various reasons it has definitely changed.”

Innovative Medicines, which until last year went by the name Rx&D, began life as the Canadian Association of Manufacturers of Medicinal and Toilet Products in 1914. Its founding members have long since disappeared or been acquired by one of its 50 current members and its name has changed several times over the years. Nevertheless, this trade association has been central to the often-complicated interplay between these businesses and the government agencies that set regulations to oversee the drugs that they market. 

The largest of those businesses have invariably been Canadian subsidiary operations, a reflection of how the multinational character of the industry first emerged. Over the last two decades, many of these branch operations have been reduced or eliminated altogether as corporations coped with rising research expenses and reduced product lines. Statistics Canada figures point to a steady decline in the number of Canadian pharmaceutical industry research jobs, which peaked in 2006 at just under 6,000 but by 2012 had dropped to around 3,300. 

Insulin bottle

At the same time, the amounts that these companies spent on research and development have also declined, although relative to other parts of the economy they are still substantial. On the definitive list of top 100 Canadian R&D spenders assembled by RE$EARCH Infosource Inc. for 2012, fully one-fifth of the companies are in the pharmaceutical sector and their expenditures were considerable. Generic drug maker Apotex had increased its spending by 19 percent over the previous year to reach $207 million, for example, while Sanofi’s spending had fallen by 19 percent but was still a sizeable $122 million.

These changes did not surprise Paul Lucas, who spent 16 years as CEO of GlaxoSmithKline Canada, where he had a front-row seat, watching the longstanding administrative structure of drug manufacturing run headlong into the biochemical difficulties of finding new products. At the beginning of Lucas’s career, patent medicines were far fewer and untreatable diseases more common. Advances in scientific knowledge, along with new technology to unravel the molecular biology of receptors or blockers that could serve as drug mechanisms, irrevocably altered the pharmaceutical landscape in the 1980s and 1990s. “That was the golden age of pharmaceutical discovery and development,” Lucas says. “You had the cholesterol-lowering agents, you had all the hypertensive drugs, you had a lot more antibiotics, migraine drugs, cancer drugs, HIV drugs.”

In retrospect, Lucas adds, these breakthroughs captured most of health care’s low-hanging fruit, dealing with problems that were comparatively easy to address with a specific agent. What is now being tackled are much less accommodating diseases, such as neurological disorders or complex cancers whose inner workings have so far resisted pharmaceutical fixes. At the same time, governments were responding to ever-more strident calls for public safety, which placed greater demands on how these products are tested and distributed. “The costs of regulation, getting drugs approved, running clinical trials — it really forced the industry to partner outside their four walls,” Lucas says.

In-house pharmaceutical research activities subsequently built new bridges to the academic world in order to share some of the risks and opportunities associated with drug discovery. “It takes years to develop medicines and vaccines,” says Hamill, adding that exploratory efforts almost invariably end in failure. As opposed to working behind closed doors, scientific inquiries open to a broader spectrum of researcher who can much more quickly determine what does not work. “Failing faster is an advantage,” Hamill adds, pointing to savings in time, money and fruitless effort.

The result has been the emergence of partnerships pooling government support with academic and industry investigators on drug discovery projects that would otherwise be all but impossible to sustain. Such joint undertakings include NEOMED in Montreal (housed in a building vacated several years ago by AstraZeneca), the Medical and Associated Sciences (MaRS) Discovery District in Toronto and the Centre for Drug Research and Development in Vancouver. For Hamill, these sites represent the latest and most practical attempts to meet the objectives originally set by drug manufacturers. “They are examples of institutions that will result in new treatments for Canadians and others around the world,” he says. “Canada should be proud of that.”

For his part, David Allan, the 2017 winner of the Chemical Institute of Canada’s Julia Levy Award for successful commercialization of innovation, feels that Canada can do much more to develop pharmaceutical discoveries. He works with companies in the life sciences and biotechnology that are trying to break into the pharmaceutical sector, something he did with his own firm YM Biosciences, which specialized in the development of hematology and cancer-related products. In 2013 he sold that company to Gilead Sciences, an American R&D giant whose revenues dwarf those of the largest Canadian banks. He marvels that Canada appears unable to spawn these kinds of independent enterprises in a country that punches well above its weight in a burgeoning field of research. “Toronto — just the city of Toronto — produces more peer-reviewed papers in medical science than any other medical centre in the world,” he says. “Where are the companies? Where are those taking advantage of these basic knowledge resources to create companies of value?”

Allan contrasts this situation with Canada’s place at the forefront of natural resources development, which he credits to a federal flow-through share program that heavily subsidizes risky investments in exploration and development. No such incentive exists to offset risky investments in drug discovery or biotechnology, he says, even though considerable amounts of public money have already been invested to lay the scientific foundation for growth in these areas. “Instead of encouraging investment in lesser-risk geological exploration, public policy should encourage capital for high-risk biological exploration to develop the vast dormant resource of Canada’s basic medical research into medicines to benefit patients and provide a return on society’s huge investment,” he says. “Society needs to make a return on its investment, just like a pharmaceutical manufacturer does. That return only comes when a discovery or innovation is converted into a product that’s useful to human health.”