Pharmaceutical Research and Development (R&D) Increasing Efficiency Through Information Technology

Declining ROI on R&D Investment is Among the Biggest Concerns in the Current Pharmaceutical Industry

Online PR News – 17-May-2010 – – While R&D (Research and Development) has always remained an integral and most vital function of the pharmaceutical industry, its declining productivity has raised concerns among the key stakeholders of the industry. One of the simplest, yet most important, indicators of the declining Return on Investment (ROI) has been the widening gap between the R&D expenditure and the number of new drug approvals, especially since 1996. When the FDA (Food and Drug Administration) approved 53 NMEs (New Molecular Entities) in 1996, the R&D expenditure of the industry stood at approximately $21.9 billion. However, the NME approval rate reached its nadir within just six years with just 17 NME approvals as the R&D expenditure almost doubled to $42.3 billion. R&D expenditure is steadily increasing, but this is not reflected in the number of new drug approvals. This has increased the cost of new drug launches to astronomical levels. While it used to cost less then a billion ($842m) to launch a drug in 1999, the cost went to as high as $3.5 billion in 2007. In addition, the negative pricing and reimbursement pressures are adding to the woes of the pharmaceutical companies who try to generate high revenues from their novel drugs. With key blockbuster drugs in the industry set to expire within the next five years and a clear lack of potential blockbusters in the current pharmaceutical industry pipeline, the industry experts are looking for ways to mitigate the risks and improve their Return On Investment on R&D expenditure.

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So far, the industry has taken a number of measures to address the challenge of declining R&D productivity but nothing substantial has emerged as a result. One of the most extensive measures has been acquisitions of small pharmaceutical and biotechnology companies with specialized R&D capabilities and promising pipeline candidates of the acquirer’s interest. In addition, the pharmaceutical industry has also witnessed significant consolidation with some of the largest mergers of the decade such as Pfizer-Wyeth, Roche-Genentech and Merck-Schering-Plough. Pharmaceutical companies also underwent significant restructuring of their R&D processes in order to realign their focus to the key strategic therapeutic areas while divesting from the non-core areas of business. Other measures include outsourcing clinical and preclinical drug research to CROs (Contract Research Organizations) and better lifecycle management of the existing drugs.
However, so far, none of the measures have generated the desired results as R&D productivity continues to remain a matter of concern for the pharmaceutical companies. Critics view mergers and acquisitions as a quick-fix solution with no evidence of long term gains in terms of R&D output or improved ROI on the R&D costs. On the other hand, R&D restructuring has gained pace only recently to show any results. While outsourcing R&D to CROs and drug discovery companies in emerging countries provides cost advantages, the advantage is partially offset by the increase in failure rates. Other solutions such as lifecycle management have their own limitations in terms of safeguarding the company revenues against the declining R&D productivity. Thus, none of the solutions, so far, has been able to effectively counter the challenge of declining R&D productivity.

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GBI Research, the leading business intelligence provider, has released its latest research “Pharmaceutical Research and Development (R&D) - Increasing Efficiency through Information Technology and Externalization” which provides the key data, information and analysis on the major pharmaceutical R&D practices undertaken at the global level in order to improve efficiency and effectiveness. The report provides comprehensive insights into the major challenges in the current pharmaceutical R&D landscape. It analyzes the key measures and practices (mergers and acquisitions, R&D restructuring, outsourcing and active lifecycle management) adopted by the pharmaceutical industry to tackle these challenges and improve the R&D efficiency. The report substantiates the analysis with various case studies to study the effect of the measures post-implementation. The report also provides an analytical insight into the potential solutions that have tremendous potential to improve the future pharmaceutical and biotechnology R&D productivity.

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