The startup challenges in the pharmaceutical industry today contrast starkly with the comparatively simpler landscape before the 10th century. Regulatory burdens, a significant cost driver for modern startups, weren’t commonplace until around that time. Sometime around the 10th century formal inspections of “medicines” manufacturing gained traction. The history of creating and trading medicines is nothing new to human civilization.
Evidence of blending specific plants that are now known to reduce inflammation and produce some pain relief have shown up as early as 300 BCE [1]. A notable example is Mithridatum, first compounded around 120 BCE [1-3]. It was originally a blend of 41 primarily plant-derived components, and was used to treat many disorders including, poison antidotes, plague, epilepsy, although, it failed as a remedy for most ailments [1]. The formula evolved over time, incorporating animal tissue, and even viper venom [1]. It was used as a panacea for almost all diseases.
The initial recommended dose was an amount the size of an almond, to be taken daily. Regulatory “oversight” of “drug shops” in emerged around the 10th century BCE in Italy [3]. England took a bit longer to catch on to the importance of inspections to ensure public health with manufacturing oversight of Mithridatum emerging in London around 1540 [3]. Interestingly, viper venom, once a part of this ancient remedy, became a key component of the first ACE inhibitor—a 1970s blood pressure medication subjected to rigorous scrutiny and high development costs. Establishing a pharmaceutical company in earlier eras appeared significantly less intricate compared to the multifaceted challenges faced in the present day.
Today’s Startup Challenges
I’ve been involved with several startups in the ethical medicines industry, where I’ve witnessed firsthand the numerous challenges faced by small entrepreneurs. Ethical drug products necessitate prescriptions, extensive research, development, and oversight before they can be sold. It’s important to note that these products differ from supplements, which undergo far less regulatory scrutiny and are cheaper to bring to market.
The expenses involved in introducing an entirely new drug (not a generic version or modification of an existing one) are difficult to pinpoint. A comprehensive review of available literature shows that obtaining approval for a new medical entity (NME) spans a wide cost range, from $161 million to over $4 billion [4]. These costs vary based on factors such as the estimated approval timeline, success likelihood during discovery, each stage of development, therapeutic category, and regulatory classification (e.g., qualified expedited approval). This is not a place suited for small players without adequate funding.
Smaller entities often find it more feasible to produce generic versions of existing drugs. However, although much less than NME’s, expenses are significantly high to develop and obtain FDA approval for generic drugs.
There is a Pathway
An advantageous regulatory route for smaller companies, often referred to by entrepreneurs as the 505 b-2 approval process, exists. This method is tailored for innovations made to existing drugs and allows for patent protection. Products that are strong contenders for this approval category are those already proven effective but come with high costs, usage difficulties, or prescription complexities. Enhancements that offer marketable advantages by simplifying the lives of patients and prescribers, improving safety, and potentially enhancing clinical effectiveness through easier compliance present the most promising market opportunities for entrepreneurs in this field.
Challenges
For a small Pharma startup, numerous challenges and roadblocks lie ahead, some of which can be quite overwhelming. Today’s drug industry doesn’t accommodate bootstrapping; if you’re a small player, having substantial backing from a larger entity becomes imperative. In our initial startup, this backing was the only thing that saved us from a tactical competitive threat by a much larger company. Although some investors received less than their original investment, without venture funding enabling a quick, calculated, and successful response to the threat, there would have been no return.
Adequate funding stands as a critical factor. Time poses a significant challenge in drug development because of the fierce competition among contenders and knowing that any delay represents significant increases in cost. Market sizes for small companies hover around tens of millions of dollars, while medium-sized companies target hundreds of millions. Navigating a pre-revenue pharmaceutical product from conception through FDA approval to a successful product launch demands a blend of technical, regulatory, strategic, and operational skills. However, without sufficient funding, these skills become irrelevant.
In our experience, everyone involved in our business had a background in the medical, pharmaceutical fields. If a specific skillset was lacking, we knew where to acquire it. Key skills essential for this arduous process encompass an in-depth grasp of FDA regulations, guidelines, and requirements pertaining to pharmaceutical development, approval processes, and post-approval compliance. Navigating this complex regulatory landscape and assembling a comprehensive submission for the FDA is critical.
Successful maneuvering through FDA approval and product launch necessitates a diverse team possessing these skills, along with a commitment to teamwork, adaptability, and a customer-centric approach. Additionally, staying abreast of evolving regulations and industry trends remains vital for success in the pharmaceutical sector.
Competitive Environment
Competitive rivalry within the drug industry remains exceptionally fierce. Smaller companies operate within market sizes spanning tens of millions of dollars, heightening the competition for a relatively small market size. This fosters an environment where survival hinges on a company’s ability to innovate, differentiate its offerings, swiftly enter the market, and secure patent protection. These elements become critical for smaller entities to carve out their space amid fierce competition.
However, medium-sized companies operate within market segments worth hundreds of millions of dollars, amplifying the pressures they face. With higher stakes, these companies become magnets for increased competition. They encounter challenges from smaller firms seeking growth opportunities and larger corporations fiercely guarding their established market positions.
Establishing a startup pharmaceutical business in earlier eras appeared significantly less intricate compared to the multifaceted challenges faced in the present day. One must definitely do more than “remember to first behead their viper!” The fight for prominence in these markets is continuous and the need for rapid innovation and strategic market positioning never ceases. The importance of agility, innovation, protecting intellectual property, and a good bit of LUCK, becomes paramount for survival and growth in an industry shaped by stringent regulations and escalating developmental costs. Upcoming articles will dig deeper into the complexity of a startup in the medical-pharmaceutical arenas, focusing on skills, personnel (good and bad, red flags, etc.), and how to overcome barriers.
References
- Norton, S., The pharmacology of mithridatum: a 2000-year-old remedy. Mol Interv, 2006. 6(2): p. 60-6.
- Magowska, A., The natural history of the concept of antidote. Toxicol Rep, 2021. 8: p. 1305-1309.
- Mann, R.D., From mithridatium to modern medicine: the management of drug safety. Journal of the Royal Society of Medicine, 1988. 81(12): p. 725-728.
- Schlander, M., et al., How Much Does It Cost to Research and Develop a New Drug? A Systematic Review and Assessment. Pharmacoeconomics, 2021. 39(11): p. 1243-1269.
