Sunday, November 21, 2004


Mounting financial and legal woes are giving Merck a prescription-strength headache. With Chief Executive Officer Ray Gilmartin testifying on Capitol Hill about what Merck knew about Vioxx and when, it is easy to overlook the drug giant’s ongoing efforts to treat and cure disease.

Before its stock price sagged 40 percent and both litigators and regulators began circling overhead, Merck invited several journalists to its 415-acre research and development center 30 miles from Philadelphia. As other pharmaceutical investigators can attest, Merck’s 10,000 scientists and support personnel here help explain why new drugs often cost so much.

Standing in the middle of his $4 million lab, Dr. Graham Smith points to an LCMS Mass Spectrometer that atomizes test compounds and evaluates them for healing properties.

“Of the 1,200 molecules tested here last year,” Dr. Smith says, “eight went on to the next step. And not all of those will go on to become drugs.” Dr. Smith and his team of analytic chemists fail steadily, on average, for 6 weeks before discovering a potential therapy. Another 32 days usually pass before that happens again.

Merck is not alone in throwing most of its darts straight into the floor. According to John T. Kelly, M.D., of the Washington-based Pharmaceutical Research and Manufacturers of America, “Only 5 in 5,000 compounds that enter preclinical testing make it to human testing. And only 1 of these 5 tested in people is approved for sale.”

Citing Tufts University data, Dr. Kelly added: “On average, it costs a company $802 million to get one new medicine from the laboratory to U.S. patients. This process normally takes 10 to 15 years.”

Drug researchers are not just patient. They are amazingly tidy, too. Building 17, Merck’s 2-year-old, $180 million Biologics Pilot Plant on West Point’s Discovery Way, has glowing floors, gleaming steel fixtures, and smudgeless glass — as if the place were scrubbed hourly by hyperactive Swiss maids.

“We can grow cell cultures, bacterial cultures, mammalian cells, live viruses,” says Joye Bramble, Ph.D., a biochemical engineer and 14-year Merck veteran. “There are only three or four buildings in the world like this.” She points through the pristine double-pane glass of one bioreactor suite. “This room alone is on the order of $10 million” in value. “Universities don’t have this. The National Institutes of Health doesn’t have this.”

Eliav Barr, M.D., Merck’s senior director for clinical research, works on a vaccine to prevent the Human Papillomavirus. Sooner or later, HPV afflicts 50 to 75 percent of sexually active adults. HPV causes genital warts, as well as cancers of the cervix, vulva and anus. So far, tests have found the vaccine 100 percent effective against HPV-16, one of the virus’ particularly menacing strains.

None of this comes cheap, either.

“Several hundred people are working on this exclusively around the world for Merck,” Dr. Barr says. Consequently, the company has built clinics in Iceland, Peru and Thailand. “Merck put equipment in, and we’ll leave it in,” Dr. Barr says. This will provide a steady stream of scientific data for obstetricians and gynecologists.

Merck also has built a $100 million structure specifically to manufacture the HPV vaccine. If approved, the drug’s price will reflect, in part, this huge up-front investment. But if it fails to secure Food and Drug Administration approval, Merck will be the proud owner of a gleaming, $100 million white elephant. This sunk cost will have to be spread across the rest of Merck’s product line. Alternatively, this money could be subtracted from shareholder dividends, employee salaries, or new research and development. These are lame long-term strategies.

That, and more, adds up. This is why new cures cost what they do, and why price-controlled Canadian drugs, industry-led product discounts, and California Democratic Rep. Henry Waxman’s comment that “frankly, it doesn’t make sense to me” that innovation and high prices are connected, all will make it harder for Merck’s lab and its counterparts to cover their costs. These factors boost the odds that the lights in these miracle factories will flicker, then fade to black.

The vaccine against this ailment is for pharmaceutical companies to teach Americans — starting with Washington’s bipartisan political class — a simple but vital truth: Those little pills do not invent themselves.

Deroy Murdock is a columnist with the Scripps Howard News Service and a senior fellow with the Atlas Economic Research Foundation in Fairfax, Va.

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