But the old-school approach to drug development is expensive, time-consuming and prone to failure. Nearly 75 percent of the 5,000 drug candidates currently tested in these different phases fall short of expectations and never reach the market. Factoring in the cost of all the drugs that fail, drug companies spend an average of $880 million and 15 years to develop each new drug that does make it to market, according to a recent study by the Boston Consulting Group. And, of course, they pass those costs on to the consumer (employers, hospitals, insurance plans and patients) with prescription drug markups that have become the target of increasing criticism.

Such high costs (and the ensuing negative publicity) have finally brought the pharmaceutical industry, kicking and screaming, into the IT age. In fact, bioinformatics may be just the shot in the arm drugmakers need to survive in an increasingly competitive and consolidating field. By fully integrating these new technologies, analysts say, pharmaceutical companies could cut the cost of creating a new drug in half and shave two to three years off the development. In addition, informatics holds the promise of uniting what have traditionally been separate research and development efforts within the same companies.

"We’re an information-based industry, but we’ve been a bit behind in the extent to which we’ve been using computer-based tools," Dinerstein says. "They’ve had better computer models for oil drilling than we’ve had for drug discovery."

While executives in this closely guarded industry won’t say how much they’re investing in research and development informatics, they are definitely hopping on board. Merck & Co. in Whitehouse Station, N.J., recently paid $620 million to acquire Rosetta Inpharmatics, a genomics and technology company based in Kirkland, Wash. And New York City-based Pfizer says it recently spent more than $100 million to create an "integrated system of high-speed discovery technologies." Pradip Banderjee, a senior partner with Accenture Consulting, conservatively estimates that drugmakers as a whole spend more than $4 billion a year on that kind of technology, not including the cost of hardware. But compared with the cost of a clinical trial -- particularly a failed one -- it’s not much. "We spend tens of millions of dollars on early clinical trials. If you could use this technology to tell someone early on whether or not to do a clinical trial, that would be significant," Dinerstein notes.

Gigabyte Glut

Bioinformatics may also be the only way drug companies can deal with the gigabytes of data they produce and receive every day. The pharmaceutical trade organization Pharmaceutical Research and Manufacturers of America predicts that by 2003, scientists will have discovered more than 10,000 potential targets for drug development, resulting in what some call "target glut." And that number will only get larger thanks to the 30,000 genes and an exponentially greater number of proteins being identified and analyzed in the Human Genome Project. At the same time, combinatorial chemistry allows companies to synthesize more than 100 compounds per chemist per year. "Informatics is how you deal with the amount of data being generated," says Rick Roberts, global head of discovery research informatics for Pfizer.