Open Source Strategies

A blog about open source software and business models, enterprise software, and the opentaps Open Source ERP + CRM Suite.

Saturday, January 21, 2006

When Billions Aren't Enough

Our favorite anti-open source article, "Winning the Linux Wars", suggested that Microsoft partners should be "Playing the R&D card" by emphasizing that "Microsoft invests north of $6 billion a year on R&D. There is nobody in the Linux world that does that."

Well, Merck (MRK) invests about $4 billion a year in R&D. Bristol-Meyers (BMY) $669 million. Eli Lilly & Co. (LLY) $2.7 billion. Pfizer (PFE) $1.8 billion. Sanofi-Aventis (SNY) a whopping $10.2 billion, or nearly half of its $20.5 billion in revenues. Together, that's about $19.5 billion a year in research and development.

Apparently, though, that's not enough. This Friday (January 20, 2006), The Wall Street Journal's "Science Journal" ran article entitled "In Switch, Scientists Share Data to Develop useful Drug Therapies" which pointed out that there is a "crisis in 'translational science,' or turning basic discoveries into therapies," and that only twenty new drugs were approved by the US Food and Drug Administration in 2005.

One billion a drug, approximately.

More importantly, the article points out some interesting trends:
  1. The pace of basic biomedical research is outstripping the pace of translational research. In other words, we're learning about genetics and biology faster than we're able to make drugs based on that knowledge.
  2. As a result, foundation grants have not produced concrete results of cures for illnesses.
  3. In response, the foundations are now shifting funds from basic research into therapies, taking over a role once left to industry.
No doubt much of the problems here is specific to the pharmaceuticals industry and the fact that we are in between sciences: the traditional pharmaceutical companies continue to research chemical cures, while basic research is focused on genetics.

Nevertheless, the fact that non-profit foundations are now moving into product development suggests that the fundamental research and product development model is encountering problems. Usually, a well-financed industry (and few are as well-financed as major pharmaceuticals: MRK, LLY, PFE, and BMY have $43 billion in cash and short-term investments between the four of them) should be ideally positioned for product development, while only basic science needs charitable support.

But there is hope: one key gene for multiple sclerosis could now be turned on and off in mice "a year sooner than they would have been, thanks to a unique collaboration that is slaying some of the most sacred cows in bio-medicine."

What is the unique collaboration? Sharing knowledge. The foundation which sponsored the research is apparently requiring the scientists it funds "share results in real time," rather than keep their discoveries proprietary. As a result, it has made the scientists feel more accountable for their work and therefore become more engaged in curing diseases.

The parallel with open source is clear. There is a real benefit to research and development when knowledge is shared. Other researchers could extend your work in new and novel ways. Furthermore, there is transparency and accountability for your work. That transparency in turn grants prestige and recognition, which are often powerful motivators. Perhaps this combination explains why academia has always been, and continues to be, a very efficient way to do research, even though their budgets are limited compared to industry.

The parallel from open source is also interesting. If open source and collaborative development is a successful model, could it help make research and development in other fields more efficient? The medical industry is sliding from open knowledge and collaborative research into a proprietary world of patents, licensing, and investors.

But if the billions aren't enough, should they be considering a return to open collaboration?

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