Research and InventionAuthor(s): L. H. SarettSource: Proceedings of the National Academy of Sciences of the United States of America,Vol. 80, No. 14, [Part 2: Physical Sciences] (Jul. 15, 1983), pp. 4572-4574Published by: National Academy of SciencesStable URL: http://www.jstor.org/stable/14073 .

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Proc. Natl. Acad. Sci. USA Vol. 80, pp. 4572-4574, July 1983 Psychology

Research and invention* L. H. SARETT

Merck and Company, Incorporated, Rahway, New Jersey 07065

Contributed by L. H. Sarett, October 21, 1982

In this paper, I should like to touch on two areas. The first con- sists of some observations and comments about research and invention and their interrelationship, especially in the biomed- ical area. The second applies more specifically to those ingre- dients in the United States-based pharmaceutical industry and their role in international competition.

First, what are some of the characteristics of research? We can all agree, I'm sure, that it is problem oriented and driven by technology. Scientific mysteries are for solving just as moun- tains are for climbing.

Moreover, there is ordinarily a long lag between discoveries made in research and their ultimate social or industrial appli- cations. In the biomedical field, from the time of discovery of a new type of physiological transmitter substance-prostaglan- dins or enkephalins, for example-to the time that a new drug derived from that discovery is available to treat patients is of the order of 20 years.

In his personality, the researcher is obviously motivated by curiosity. He likes solving puzzles and he is led to them by an analytical sort of mind.

Again, in the biomedical area, perhaps the most famous ar- chetype is the physician working in the tropics on the complex life cycle of a parasite, perhaps a vector of yellow fever or ma- laria. Invention on the other hand has as its biomedical heroes men such as Louis Pasteur. It is oriented toward a practical goal and is thus in modern terms driven by the market rather than by technology. Research is a necessary but not a sufficient con- dition for invention. Both require problem solving but, to this, invention adds a second requirement, that the research serve a practical purpose. Invention is basically a creative art whereas research is basically an analytical one.

Of course the great imaginative leap can occur to either re- searchers or inventors. In the one case, it leads to break- throughs of a conceptual nature; in the other, to breakthroughs of an applied nature.

Research and invention have an area of overlap often called serendipity or the chance observation revealing itself to the prepared mind.

Alexander Fleming saw that a colony of bacteria was lysed by a mold organism that happened to be contaminating his cul- ture. Ten years later, accelerated through the powerful stim- ulus of World War II, penicillin was in use clinically.

Although it has very little to do with my main theme, I must recall an anecdote about these early days. As so often happens, the practical production of penicillin by fermentation, which was being studied intensively by University of Oxford micro- biologists, was terribly difficult. The producing organism did seem to grow reasonably well in hospital bed pans and some was produced in that way. It was in such short supply and in such crude preparations that it had to be recovered from urine and recycled. One patient who benefited from such recovered material was a local policeman, who was suffering from a severe mixed staphylococcus and streptococcal infection. These cir- cumstances led an Oxford professor to describe penicillin as "a remarkable substance, grown in bedpans and purified by pas-

sage through the Oxford Police Force!" Although serendipity has had its triumphs, it tends in my

experience to be rather overly popularized as an avenue to in- vention. Its contributions are many fewer numerically than those of the dedicated inventor who sets out to mobilize whatever techniques are necessary to achieve his goal. Of course, in all fairness, it does not take many successful examples of the mag- nitude of penicillin to balance the scales.

Thomas Edison, the American inventor par excellence, was particularly repelled by confusing serendipity with hard work. He said "Discovery is not invention-and I dislike to see the two words confounded. A discovery is more or less in the na- ture of an accident." He, like other inventors did have faith, courage, and persistence. "I've tried everything. I have not failed. I have just found 10,000 ways that won't work!"

Earlier I mentioned a few characteristics of the typical re- searcher. Here let me characterize my view of the inventor. First, he is iconoclastic since he lives in a world he does not wholly accept. He is dissatisfied with the status quo, by defi- nition, since he wants to do something in a new way. He is imaginative and he is persistent. These attributes often make him rather difficult for an organization to live with.

Conversely, the well-known opposition to change that char- acterizes most, if not all, organizations can easily extinguish the inventive spark. The inventor can find many reasons in an in- dustrial milieu for throwing up his hands and tacitly saying "the heck with it." And his colleagues and associates can easily find a dozen reasons why he can't get there from here. Perhaps the miracle is that large organizations ever invent anything.

So much for the individual inventor. What about nations? Are there more-inventive and less-inventive nations, given the requisite level of scientific underpinnings?

The answer is that in terms of pharmaceutical break- throughs, there does seem to be one that has stood out, at least over the last few decades. In addition to penicillin and other antibiotics, the United Kingdom has given the world proprano- lol, the original prototype of the /3-adrenergic blocking agents that has paved the way for more effective treatment of hyper- tension, angina, and cardiac arrhythmias.

It is noteworthy that the basic physiological study was per- formed in the United States but the key invention was done in an English firm. Cimetidine, the agent that has revolutionized the treatment of gastrointestinal ulcers is also a product of En- gland, indeed from the hand of the same inventor. The com- puterized axial tomographic (CAT) scanner also is an English product. Thus, although the United Kingdom may be some- what overshadowed in total contributions by the United States, as measured by major breakthroughs, per dollar of research ex- penditure, they are at or close to the top of the heap. Sweden, Germany, France, and Italy have also constructed-or recon- structed-a postwar capability for pharmaceutical invention.

Japan is a case unto itself and I shall come to it shortly.

* Presented at the annual meeting of the National Academy of Sciences, Apr. 26, 1982, Washington, D.C.

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Proc. Natl. Acad. Sci. USA 80 (1983) 4573

In the meantime, let us consider the situation for the United States-based pharmaceutical industry.

Last year the Food and Drug Administration (FDA) ap- proved the largest number of new chemical entities (NCEs)- a handy yardstick for pharmaceutical invention-since 1962. Furthermore, according to figures provided by Ralph Craine, Director of Planning at Merck, Sharp & Dohme, the number of NCEs undergoing development and proceeding toward re- lease over the coming 5 years shows a steady upward trend, compared with the past two decades. So much activity would seem to show a healthy state of invention 5-10 years ago when this cohort of drugs started into the long path of clinical de- velopment. Perhaps by an optimistic extension, it implies that there is an abundance of NCEs still under wraps but now emerging from research into the early stages of development. It is these NCEs that offer the possibility not only of improved versions of present prototypes but also of the occasional dra- matic breakthrough. Accordingly, even after the normal attri- tion, we may hope that 1992 will see a continued strong crop of new drugs. That's the good news.

But a closer look at recent data shows there is a dark side to the picture. While the number of NCEs is rising-and that is good-the source of those NCEs is shifting in a direction that is not so good.

Here is what our closer look at the numbers shows. We ex- amined four important categories of drugs: cardiovascular, musculoskeletal, parenteral antibiotics, and antidepressants. We found that during the 1969-1974 period, 16 NCEs in these four categories were approved by the FDA. Of the 16, 9 or 56% were originated by United States pharmaceutical firms. From 1975 to 1980, 25 NCEs in these categories were approved, and- as a gleam of hope-72% of them were of United States origin. But in 1981, 14 NCEs in this group were approved for mar- keting in the United States and only 4 of them, 29%, were in- vented by United States firms.

Moreover, looking ahead, during the period from 1981 to 1986, we expect that, in the four categories, 94 NCEs will be approved for marketing. Only 37 of them, 39%, will have been originated by United States-based firms. Thus, although the total number of United States-originated NCEs during the pe- riod will be more than double the previous 6-year period, NCEs from foreign-based companies will have increased 8-fold.

Clearly, research-based United States drug firms are losing position in these categories of products. Unfortunately, esti- mates for the aggregate of all therapeutic classes show a similar trend.

Meanwhile, the total of new chemical entities tested con- tinues to grow, because of the growing size and sophistication of research abroad. For example, during the 1960s and early 1970s the number of United States investigational new drugs (INDs) filed on chemical entities discovered in Japan amounted to perhaps one a year. In recent years that number has grown to three or four per year.

In 1981, 65 major pharmaceutical products were introduced throughout the world. Would you like to guess what country was responsible for the second largest number of drugs on this list? It was the United States! The largest number came from Japan.

The trend is also acutely demonstrated in the area of anti- biotics. Six out of nine antibiotics scheduled to be introduced in the United States over the next few years were discovered in Japan. The United States-based companies that will intro- duce them are for the most part the same ones that in previous decades were successful innovators of antibiotics through their

elsewhere is in some degree traceable to the rebuilding of shat- tered Asian and European economies following World War II. Immediately after the war, these nations had first to rebuild their basic industries-steel, transportation, and so forth. The production of nondurable products-particularly drugs, which take so long to get through the pipeline from discovery to mar- ket-was deferred. But now these products are showing up in growing numbers.

Intramurally Japan has increasingly strong incentives to de- velop international markets. Profitability in its home market is being reduced by domestic drug purchasing policies of the Jap- anese National Health Insurance Program. Moreover the cost of developing a new drug has risen to such levels that it is al- most impossible to realize a profit in their domestic market alone, even though Japan is the second largest pharmaceutical market in the world.

From the standpoint of the physician and the patient, it makes little difference where a new drug originates, and licensing-in by American drug companies does present one sort of business opportunity in the United States. What is disturbing, however, is that the deterioration of innovative capability has become an all-too-familiar feature of American industry. The high-tech- nology industries have now begun to follow the automotive, the optical, and the consumer electronics industries in their loss of world leadership.

Is United States-based pharmaceutical innovation following the same disastrous path?

The optimists can point out that Japan has no direct mar- keting capability in the United States. The marketing of Jap- anese products is done by United States-based pharmaceutical companies under license. With this arrangement the devel- opment, distribution, and, often, the manufacture of new drugs are carried out in the United States. Is this not a mutually ben- eficial arrangement and one that will be maintained indefi- nitely? I believe that history will show that the answer to that question is "No!"

For precedent we need look no further than the history of our own domestic industry since the early years of this century. At that time the American industrial leaders were serving their own domestic market. Europe was served by distribution of American drugs via European companies. As time went on, it became apparent that there were significant advantages to con- trolling manufacture and sales of products overseas. Hence the foreign distributor and licensee relationships began to disap- pear. In their place grew subsidiaries of multinational corpo- rations such as characterize industrial leaders today.

An exactly parallel development has occurred within recent years, stemming from the growth of primarily Swiss-, Ger- man-, and British-based corporations. The largest of these have dispensed with licensing and distributor arrangements in the United States and substituted their own wholly owned subsi- diaries.

This seemingly inexorable pattern of exploitation of foreign markets is surely not lost on Japan, who, after all, in addition to the internal pressures generated by their national drug reim- bursement program, have the stunning success of their inva- sion of other industrial sectors to lure them on. No, it seems inevitable to many observers-and I am one of them-that the emergence of Japanese multinational pharmaceutical compa- nies is a real possibility and that it will be Japanese-and to some extent European-research products that dominate the hospitals and pharmacies of the United States. The present li- censing type of arrangement is a metastable situation and one that is likely to last only so long as it is to the advantage of Japan

own research efforts. The relative growth of research productivity in Japan and

to keep it so. When it changes, those changes will come at a price. The

Psychology: Sarett

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Proc. Natl. Acad. Sci. USA 80 (1983)

deterioration of our research capabilities in indigenous industry will result in nothing like the unemployment that the foreign automakers have created. Nonetheless there will be a national bill to pay in terms of some jobs, an unfavorable export-import balance, and of a loss of a vital research capability that we as a nation cannot afford to ignore.

Before I turn to remedies and bring this real life example back into the sphere of our discussion today, let me make it very clear that the foreign competition-both Japanese and Eu- ropean-have done a highly meritorious job. They have learned the rules and played by the rules and have played very well indeed. No one can attribute their success to skullduggery. Their governments show a degree of protectionism but that is not enough in my opinion to account for their conquests.

If then, as I submit, United States pharmaceutical research is slowly being beaten by foreign competition, what are the rea- sons and what, if any, are the remedies?

A lot of causes for difficulties of the industry have been ad- vanced over the years and most of them are familiar to all of us. There are external factors such as the Kefauver-Harris Amendments of 1962 and the overly rigid interpretation of the amendments by the FDA. There is the impact of inflation on Research and Development (R&D) investment and in fact, us- ing a biomedical research cost deflator, domestic pharmaceuti- cal industrial R&D as a percentage of sales has fallen to half what it was 20 years ago. There is also the escalating length of time required for study of a drug before marketing, which re- quires 7-10 years of nonproductive investment with a product launch at the end that is still full of risk. On top of these factors, the pressures on industrial managers to show quarterly growth in earnings has weakened long-term strategies and, of course, the first victim is inevitably longer-range research programs.

All of these factors have no doubt contributed but there is one that has received less attention and yet is in my opinion as decisive as any of these in undermining our inventive capaci- ties. This factor is interwoven with many of the others, rein- forcing some and generating others.

What I refer to is a psychological transformation, one that has permeated much of technology-based industry and certainly characterized much of the traditional United States-based pharmaceutical industry. It is a defensive psychology, a siege mentality if you will, and it has largely replaced the entrepre- neurial inventive spirit of earlier decades.

The cause is plain enough. Years of an adversarial attitude by government, some of it generated by a mistrustful public, some by politicians finding industry an easy target, have had their inevitable consequences. Boards of directors, necessarily pragmatic, saw that corporate survival was contingent on avoid- ing congressional and regulatory land mines. Entrepreneurs tend to charge boldly ahead and in that sort of climate, often blow themselves to kingdom come. It does not take many invest- ments in new products to be lost at $50 million a clip before managers are appointed who are cautious and better able to avoid expensive mistakes. It does not take many inquisitions on Cap- ital Hill with television lights blazing before managers are ap- pointed who are capable debaters. In a milieu of social discord,

it is not usually the technological entrepreneur who is best equipped to survive.

In a now famous study in-the Harvard Business Review, Hayes and Abernathy have pointed out what has happened at top lev- els of American corporations, specifically, that starting in the mid-1950s, there has been a substantial increase in the per- centage of new company presidents whose primary interests and expertise lie in the financial and legal areas, not in the tech- nical or manufacturing areas. Since corporate attitudes and pol- icies are built from the top down, it only becomes a matter of time before research managers begin to spend their waking hours trying to avoid risks, to stay out of trouble, and to manage their existing assets more efficiently instead of concentrating on cre- ating an environment where the troublesome and wavering lamp of the inventor can glow more brightly.

Of course there are still large budgets for research in the pharmaceutical industry, as high even as 8-12% of sales. But less and less of that investment is surfacing as invention.

Now why is Japan doing so well? We know that, unlike the British, they have not uncovered new breakthrough drugs, en- tirely new prototypes. The point has been well made that in that country there is social cohesion in place of social discord, there is orientation toward goals, toward production, and to- ward economic progress in place of destructive self-criticism and makeshift redeployment of assets. The Japanese have ex- ploited these attributes to the full. They have steadfastly fol- lowed the breakthroughs of the more-innovative countries and invented second-generation models with real improvements; not breakthroughs, to be sure, but solid medical and commer- cial successes.

Is there any doubt that with this sort of record established they will turn their hands to more-innovative and less-imitative biomedical research? And granted that, is there any doubt that when they do, they will make a success of it?

Assuming that a feeble and noncompetitive domestic phar- maceutical industry is a liability this country cannot afford, what then are the remedies? Of course, some incentives to inno- vation have been added in recent times and some disincentives have been reduced. Tax credits for increased industrial R&D on the one hand and regulatory reform on the other-both pro- vide a measure of economic encouragement to the technology- based company. The patent system, too, weakened as its pro- tection has become through patent term erosion, is still a bul- wark for the inventor and thus for all of pharmaceutical inno- vation.

These positive economic factors notwithstanding, there still remains an enormous challenge. The psychological milieu within the corporate world, the result of 20 years of adaptation to an adversarial environment, must be turned around and the miss- ing parts must be rebuilt. Without sacrificing many of the hard- won skills-largely developmental skills-that the industry has learned from its vicissitudes, it must devote itself once again to the nurture of the inventor. He must be recruited, moti- vated, and rewarded. The success of the industry in the fierce world of international competition depends more now than ever on the ability of industrial managers to do exactly that.

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