The Wall Street Journal came out with a series of articles on innovation in the US, and the biopharma industry features quite a bit in them. The lead one is an overview, with the theme of “The US economy’s hidden problem is that we’re out of big ideas”, and there’s another one specifically on Sanofi and Warp Drive Bio (if you’re having trouble seeing those, try getting to them via Google News).
It makes some good points, but I’m starting to feel the effects of experience at this point in my life. By that, I mean that I’m pretty sure that I’ve read similar stories in the past – in fact, I’m asking whoever does the “Pessimist’s Archive” account on Twitter (I have my own suspicions) to see if they have examples from decades past. What the paper has in mind, though, are effects on the standard of living:
Economies grow by equipping an expanding workforce with more capital such as equipment, software and buildings, then combining capital and labor more creatively. This last element, called “total factor productivity,” captures the contribution of innovation. Its growth peaked in the 1950s at 3.4% a year as prior breakthroughs such as electricity, aviation and antibiotics reached their maximum impact. It has steadily slowed since and averaged a pathetic 0.5% for the current decade.
Outside of personal technology, improvements in everyday life have been incremental, not revolutionary. Houses, appliances and cars look much like they did a generation ago. Airplanes fly no faster than in the 1960s. None of the 20 most-prescribed drugs in the U.S. came to market in the past decade.
This is partly correct, but partly misleading. The article itself goes on to mention some good reasons why – some of the innovations are doing good in ways that don’t show up in GDP (such as cleaner air and water), and some of them take a long time to kick in (for example, it was decades after the electric light bulb that electricity really began to make a noticeable difference in the economy). I’m going to dig into the archives myself to see how the 20 most-prescribed drugs look over the years. In that case, though, I wonder if there has been a slow change over time, because in pharmaceuticals, as in several other fields, there’s what’s been called the “better than the Beatles” effect. Good drugs are good drugs, no matter how old. Aspirin and ibuprofen still sell in huge amounts, and why not? As former prescription blockbusters go generic, the barriers to entry really do get higher every year.
That’s a general phenomenon. To pick some of the examples in that quoted paragraph above, look at (say) home appliances. Inventing the washing machine and the dishwasher – those were big steps. Their designs have become optimized over time, and it’s hard to see how some completely new disruptive technology will shake them up – spraying warm soapy water on plates really does seem like the best way to get them clean, and a lot of us have tended to eat off plates. As for airplanes, that 1960s date skips over the 1970s and 1980s, when supersonic passenger planes were flying – but at a huge loss. Aircraft design is another one of those areas that becomes progressively harder to improve on, although (and some of these are also non-GDP effects) the current planes use less fuel, carry passengers less expensively per capita, and are quieter than the ones in the 1960s. (It should also be noted that we’re also flying over ten times as many passenger miles as back then, too).
So to some extent, it’s true that huge technological disruptions may well become harder to realize over time. Tyler Cowen talked about this in The Great Stagnation, which is a good place to read up more on the whole issue that these WSJ articles bring up. The gains that the industrialized countries have realized from switching away from agriculture, educating the broader population for the first time, introducing things like clean water and electricity, automobiles, and so on are hard to reproduce. Those were huge, and they affected a lower baseline. But in the same way that many people didn’t see some of those things coming, there are likely to be things that we’re not picking up on, either. A separate (but important) issue, as mentioned above, is whether or not GDP is an appropriate way to measure some of these changes or improvements, too.
What about the drug industry, then? That Sanofi/Warp Drive Bio article is interesting, and presents a good inside view of what’s been happening with that collaboration, which made a big splash at the start. I’ve wondered over the years how things have been going there, and the article makes clear that (as is so often the case) the company has had to adjust to research reality along the way. As it stands, they’ve delivered a set of potential antibiotic leads to Sanofi, and I hope that something comes out of that – it’s interesting work and good science.
But the whole thrust of the article, and the reason it’s part of this particular series, are a bit off, from my perspective. I think the idea is supposed to be that the big companies are out of ideas, and that they’re frantically trying to “outsource the science” to those few startups who can think of something. Now, in a bad mood, this sounds fairly plausible. But big companies have been doing deals with smaller ones in this field for a long, long time now. There are so many things to work on that one company just can’t cover them all. And many of these ideas (when a smaller company goes after them) turn out to be too expensive for them to pursue on their own funding. “Outsourcing the science” is not some new phenomenon brought on by creative exhaustion: it’s just, well, science. Smaller companies are a key part of the ecosystem, because they are constantly forming around new ideas, often risky ones (and constantly evaporating when those ideas don’t pan out). But that isn’t a new thing, either.
This is one of those “not a bug but a feature” things, in other words. Rather than a symptom of general played-outness, seeing big drug companies doing deals with smaller outfits is a sign that everything is working as it should. We should panic if that stops.