Is the future of pharma about making good drugs great? by Laura Lorenzetti @FortuneMagazine February 27, 2015, 3:22 PM EST E-mail Tweet Facebook Google Plus Linkedin Share icons The cost of developing new drugs continues to soar. These days, drug developers can expect to shell out more than $2.5 billion to create a medicine, test it, and win regulatory approvals, according to data from the Tufts Center for the Study of Drug Development. That’s more than double what it cost just over a decade ago: In 2003, bringing a new drug to market required about $802 million (that’s $1.04 billion in 2013 dollars). Some pharmaceutical and biotech companies are asking how this can be done better. One way to do it is to make existing therapies — medicines that are known, tested and approved — even more effective. “It’s a natural progression as there’s more generics out there,” said Asthika Goonewardene, a biotech analyst with Bloomberg Intelligence. “Companies have been working on different delivery methods, or combining different drugs in new ways, for awhile now. It’s a viable way to do it.” Some big name guys have entered the field, including Actavis ACT and Teva Pharmaceuticals TEVA . Other smaller guys are looking at game-changing innovations, including MannKind’s MNKD inhaled insulin Afrezza, or Heron Therapeutic’s HRTX high-tech Biochronomer, a polymer-based drug delivery platform that makes existing injectable drugs longer lasting. “By taking a drug that’s already approved, you’re trimming down the approval process,” says Goonewardene. “It’s a lower risk product because the FDA’s already liked it.” OptiNose, a biotech company outside of Philadelphia, has focused its efforts in this field. The company has developed a relatively lo-fi device that has the potential to transform treatments for problematic conditions simply by getting the medicine where it needs to go. The plastic device uses the body’s natural breath to close off the nasal cavity and send drug very deep into the nose. It takes advantage of the fact that when you blow hard out of your mouth, the soft palate closes off airway access to your sinuses. It’s why you can’t blow hard out of your mouth and nostrils at the same time. That essentially seals off the nasal cavity allowing the drug to circulate in that closed-off area while your breath sends the drug high into the sinuses. OptiNose, in partnership with Avanir, is nearing the Food and Drug Administration’s approval for its first use: to treat migraines. Clinical studies have shown that the breath-powered device gets the drug into a patient’s blood faster than oral medicine, while requiring a smaller dosage. It’s almost as fast as an injectable, but without the need to use a needle. The cost for developing this new delivery mechanism? About $30 million to $50 million. That sum includes a second treatment for chronic sinusitis under current FDA review. “The hard part of drug development is that so many good drugs fail because of safety issues, so there’s known to be really good activity in the early development stages, then they put them into animals and find side effects,” says Optinose CEO Peter Miller. “Because we’re taking drugs that have been in humans, in the case of our first two drugs, they’ve been used millions of times by people, our safety risks and therefore development and regulatory risks are a completely different magnitude than a new molecular entity.” Better delivery not only lowers the cost of development and optimizes drugs — by using less, speeding delivery or improving results — it also allows drugmakers to extend patent protections on what would be an otherwise lower-margin generic medicine. That allows for more pricing power because of improved outcomes and renewed exclusivity. (Still, there’s certainly not as much pricing power as for an all-new drug, points out Goonewardene.) This is just one delivery mechanism and one condition. There’s still huge a opportunity. Taking OptiNose as one example, the device is also being adapted to transform treatments for sinus polyps and chronic sinusitis using the widely-known drug fluticasone (you may know this by its brand name: Flonase). That would open up an under-served market worth at least $1.5 billion, OptiNose said. Even bigger: the nasal cavity is the only area where the brain meets the outside world. The potential to better treat central nervous system diseases such as Autism and Alzheimer’s by reaching the brain directly could transform treatments for those diseases, the company said. To be sure, there’s still a long way to go to confirm such things in clinical testing, and new delivery methods still rely on the library of drugs available, as well as the limitations of the human body. Progress is starting to reach the market, and it has the potential to make already good drugs even more effective.