Intro to Intellectual Property in Life Sciences

Vol. 2: Wow! The success rate of drug development is shockingly low!

In the previous volume, we discussed the types of pharmaceutical medicines and patents, so you will remember that “new drugs” are brand drugs under the category of ethical drugs. Brand drugs are medicines that have new properties and effects, and whose efficacy and safety have been confirmed through clinical trials and other means, and subsequently approved by the health authorities. In order to launch a new drug in Japan, it is necessary to obtain the approval of the Ministry of Health, Labour and Welfare (MHLW), by submitting a New Drug Application (NDA), accompanied by clinical trial results that confirm the drug’s efficacy and safety. However, during the drug development process, most drug candidates fail to even make it to the NDA stage due to low efficacy or safety. The success rate for new drug development is shockingly low.
Well today I would like to take you through the new drug development process to find out what the success rate is.

Vol. 2: Wow! The success rate of drug development is shockingly low!
– The reason why Medicines and Patents are inseparable –

New drug development must follow the process shown in the diagram below, in order to compile the necessary submission data for the MHLW approval. Unlike products in other industries, such as automobiles or home appliances, pharmaceutical development follows a completely different path—one that may be quite surprising at first glance. It all begins with basic research, where scientists search for compounds that may become the active ingredients of future drugs. This starts on the left side of the diagram.

Basic Research: 2 to 3 Years

In the basic research phase, candidate compounds that may serve as active ingredients in future drugs are identified. This involves screening to select compounds with specific biological activity, followed by an investigation of their physicochemical properties. Screening, simply put, narrows down the compounds that appear to have potential therapeutic effects. This phase typically takes about 2 to 3 years.

Preclinical Testing: 3 to 5 Years

Next, candidate compounds identified during basic research undergo preclinical testing, in which their efficacy and safety are assessed using animal models and cultured cells. This phase typically takes about 3 to 5 years. In this context, “efficacy” refers to the intended therapeutic effects the drug would have once approved, and “safety” refers to toxicity. Of the compounds identified in basic research, only about 1 in 10,000 — just 0.001% — successfully pass preclinical testing and move forward in the development pipeline^*1.

Clinical Trials: 3 to 7 Years

Once preclinical testing is completed, the process moves into clinical trials. These are human trials that evaluate the efficacy and safety of the candidate compounds that had shown promise in preclinical testing (animal studies). However, just because a compound works in animals doesn’t guarantee it will be effective in humans—so there’s still a long way to go.

Clinical trials are divided into three phases: Phase I, Phase II, and Phase III. They are conducted in medical institutions, such as hospitals, involving healthy volunteers or actual patients who participate with informed consent.

Phase I involves a small number of healthy individuals assessing safety and identifying any side effects. Phase II tests a small group of patients to determine the appropriate dosage and method of administration, as well as to confirm efficacy and safety. If efficacy is not demonstrated or safety becomes an issue, the development is often discontinued at this point.

Once Phase II is completed, the process moves on to Phase III. Successfully completing Phase II is often reported in the news, and it can lead to a rise in the stock price of the company developing the drug. That is how significant clearing Phase II is in the context of pharmaceutical development.

Phase III expands the trial to a larger patient population to compare the new drug’s effectiveness and safety with existing treatments. Clinical trials typically take 3 to 7 years to complete. The success rate at this stage is about 50%, which means that from the initial stages of basic research, the overall success rate is only 0.005%, given a 0.01% probability of reaching clinical trials and a 50% success rate thereafter.

NDA and Review: 1 to 2 Years

After passing clinical trials, the New Drug Application (NDA) is submitted to the MHLW, along with the trial results. A review is then conducted by the Pharmaceuticals and Medical Devices Agency (PMDA), an independent administrative body. This review process takes about 1 to 2 years.

Marketing Approval and Price Listing

After passing the review by the PMDA, the MHLW grants Marketing Approval (MA) for the drug. At this point, the drug can be manufactured, but it still cannot be sold. As mentioned in Vol. 1, the price for drugs covered by national health insurance is set by the MHLW through a process known as Price Listing. Once MA is obtained, the pharmaceutical company submits a Price Listing application to the MHLW. After the drug price is determined and officially listed, the product can finally be launched on the market.

As outlined above, it takes a total of 9 to 17 years from basic research to obtain marketing approval. The associated costs are enormous ranging from several tens to hundreds of billions of yen. Despite this long timeline and massive investment, the success rate is shockingly low at just 0.005%!!

That is why pharmaceutical companies must make the most of their patents, using them to block competitors from developing similar compounds and delaying the entry of unbranded drugs (generics, biosimilars)—even by a single day—to maximize profits and recover their investment.

This drives brand companies to sometimes file lawsuits against rival firms developing similar drugs, and why patent disputes frequently arise between brand and unbranded drug manufacturers. In this industry, entering the market “unarmed”—without patent protection—is not an option. As a result, companies only pursue the development of compounds (or of specific indications) that can be protected by patents. This is why Medicines and Patents are inseparable.

So, now I’m sure you, even for those of you who may have never thought twice about patents, are suddenly experiencing an overwhelming desire to learn more about them—am I right? Don’t worry! In the next volume, I’ll be talking about how to obtain a patent. Stay tuned!

^*1 Source: Ministry of Health, Labour and Welfare. Pharmaceutical Industry Vision 2021 – Data Appendix, p.12. https://www.mhlw.go.jp/content/10800000/000831974.pdf

Author Profile

Yasuko Tanaka
President & CEO, S-Cube Corporation / Patent Attorney, S-Cube International Patent Firm
Outside Director, Strategic Capital Inc.; Part-time Lecturer, Tokyo University of Agriculture and Technology Graduate School; Technical Advisor for IP-related Litigation

Ms. Tanaka graduated from Chiba University (Biochemistry) in 1990. She has worked in the IP Dept. of Teijin, Pfizer Japan and 3M Japan dealing with global patent prosecution both in English and Japanese, IP strategy/consulting, transactions, and IP education. She resigned from her last company, 3M Japan, in March 2013 to start her own venture “S-Cube Corporation” (IP Business Consultancy) in April. In August, she expanded her firm establishing S-Cube International Patent Firm.