In the multibillion dollar biotech and pharmaceutical sectors, R&D is an integral requirement to be part of the industry. The FDA does not contract with drug companies to develop treatments and cures aimed at specific health needs, funding research and making progress payments as products move through clinical trials. The companies themselves must invest in R&D from their revenue streams. The biotech and pharmaceuticals sectors invest in excess of 20 percent of their annual revenue into development of their future product pipelines. In fact, the US IT sector has an even higher percentage for R&D; and practically every industrial sector’s R&D exceeds that of aerospace and defense. The US aerospace and defense industrial sector spends 3 percent on internal R&D…
Following the suggestion to incorporate business ideas to reform various aspects of the weapons acquisition processes, the histogram of responses produced one clear quip that overwhelmingly constitutes the mode: “We deal in life and death; if business gets it wrong nobody dies. If we get it wrong, people die.” The implication is that the DOD cannot apply innovation and efficient methods from private industry sectors to major defense acquisition. Until now there was little to counter that argument, and it thwarted further advocacy for business methods. However examining the case of Amgen, a very innovative private-sector biotechnology company, an enlightened argument emerges. In drug development, if a firm gets clinical trials wrong, more than a pilot, tank crew, or special operations team might die; thousands or tens of thousands of people could be affected—along with the survival of the company. While not the only biotech firm in the United States, Amgen is the industry leader not only in market share and revenue but also in the robustness of its R&D pipeline in a growth`industry. Amgen serves as a logical model for DOD innovation and acquisition approaches.
That was David Peeler’s paper, “Biotech Business Lessons for Defense Acquisition.” The piece is difficult to excerpt, definitely recommended. Here are some other good parts:
Stripping a bureaucracy of its layers is very difficult. Overhead and bureaucracy is overly populated by petty tyrants that slow and thwart accomplishments. These maintain an outsized role relative to their value creation. The bureaucracy will fight to preserve itself, for example the jobs of the staffs that fabricate import in their roles.
Given that the defense acquisition community is the world’s largest socialist economy, we must come to understand that, “Minor adjustments and corrections to the present acquisition process simply will not accomplish this vital job.”
Sure, there are rules and lots of compliance [in the pharmaceutical industry], but drug companies are far freer to determine how to show safety and efficacy. The FDA establishes hurdle criteria, not continuous monitoring and proscriptive actions throughout the phases. Drug companies determine how to show safety and efficacy; then the FDA evaluates and renders judgment. Imagine the possibilities if defense program managers were left alone to develop programs and show performance at milestone reviews for approval or disapproval.
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