Market-based pharma innovation is useless – it’s profit driven upgrades to existing drugs – not radical new innovation

The problem is also evidenced in industries, like pharmaceuticals, where there is a trend of increasing public sector investments in R&D, while private sector spending is decreasing. According to Lazonick and Tulum (2012), the National Institutes of Health (N1H) has spent almost $300 billion over the last decade ($29.3 billion in 2013), and become more involved in the D component of R&D, meaning they absorb greater costs of drug development (such as through clinical trials), while private pharmaceutical companies2 have been spending less on R&D overall, with many shutting down R&D labs altogether. Of course the total R&D spent may be increasing, because the development (D) part is getting increasingly expensive. But this hides the underlying issue. While some analysts have justified the decreasing expenditure on research in terms of low productivity of R&D (increased expenditures not matched by increased discoveries), others, like Angell (1984, 2004, ex-editor of the New England Journal of Medicine), have been more explicit in blaming Big Pharma for not doing its share. She argues that for decades the most radical new drugs have been coming out of public labs, with private pharma concerned more with 'me too' drugs (slight variations of existing drugs) and marketing (see Chapter 3 for more details). And in recent years, CEOs of large pharma companies have admitted that their decision to downsize—or in some cases eliminate— their R&D labs is due to their recognition that in the 'open' model of innovation most of their research is obtained by small biotech firms or public labs (Gambardella 1995; China Briefing 2012). Big Pharma's focus is thus turned to working with such alliances, and 'integrating' knowledge produced elsewhere, rather than funding R&D internally.