Time is money in R&D
pharmafile | July 16, 2007 | Feature | Research and Development |Â Â clincial trials, drug development, productivityÂ
There is a much-quoted statistic, which has become so hackneyed that it's largely ignored these days, but while you are reading this, it is having an impact on you. It is this: for every day a medicine is late to market, the loss in potential sales is around $2 million.
The figure is derived from the sales of a major drug, over a typical lifetime. Of course, the extent of this loss wont apply to all drugs, but the basic principle does apply to all. Indeed, the principle is that the loss in sales is nearly always very large in proportion to the cost of ensuring the loss doesn't happen.
The cost of being late
Let me illustrate this with some data from outside the pharma industry. Some years ago, the management consultancy McKinsey and Co published data on the performance of product development in high-technology industries of various kinds. They found that projects completed six months late, but on budget, lost 30% of the profits for the product over its lifecycle. In stark contrast, they found that projects completed 30% over budget, but on time, only lost 3% of their profits. The message is simple not only is time money, but losing it is actually more costly than over-spending.
Of course, in pharmaceuticals, development times are long, but maybe not that much longer than in, say, the aircraft industry, if the Eurofighter Typhoon is any sort of benchmark. Yet people tell me that six months lateness for a clinical research programme is quite normal – actually quite good much of the time.
But we have such very important reasons for being on time. We have a limited period in which to recoup development costs and make a profit, because of finite patent protection, and there is the well recognised fast follower syndrome. Does anyone remember how quickly Zantac knocked Tagamet off the top of the H2-receptor blocker tree in the 1980s? Glaxo launched its ulcer treatment Zantac in 1981, putting it on the market five years after SmithKline's Tagamet. In spite of this time gap, Glaxo swiftly made up ground through intense marketing support coupled with a challenging pricing strategy. But things might have been different if Tagamet had had more time to establish itself – even one extra year on the market could have made all the difference. Instead, Zantac reached peak-year sales of $4 billion, eclipsing those of Tagamet.
Drug R&D is hugely expensive and risky, and we should be doing everything we can to make the whole process more efficient. So, just how well are we doing at getting to market more quickly?
The first thing to know about whether we are improving is how we can measure what we are doing. Benchmarking specific activities is becoming much more sophisticated, and data from CMR's Pharmaceutical R&D Factbook suggests that we are not getting to market any faster at all. For all companies subscribing to the CMR programme (which account for 84% of the total global R&D spend) average total development time was just under 11 years in 1998, while in 2005 (the last year with complete data), it was almost 13 years. The line shows an inexorable upward slope.
We might expect that the biggest companies, with their economies of scale and huge resources, would do better than that, and up until 2003, that was the case. Major companies are defined here as those spending at least $1.8 billion in 2005 on ethical pharmaceutical R&D. In 1998, their development times were just over 10 years, but within five years, the lines had crossed and now they are looking at more than 14 years from discovery to market. We should not forget that these are mean figures, and with major companies accounting for a large proportion of R&D activity, it tells a depressing story about the efficiency of the whole undertaking. This is despite improvements in regulatory approval times for all three ICH regions over the same period. What is going wrong, and why is it worse in large companies?
Striding forwards
I don't want to imply that making and selling new medicines is becoming unprofitable – quite the reverse. Ten years ago, R&D costs were rising faster than sales, but our salvation is that sales have recovered and the trend has been reversed. How long this can be sustained is open to question, in view of the continuing decline in novel drugs coming to market. In 1996, major companies launched 48 new molecular entities, a figure that was down to 29 in 2005, and of these, 21 were biotechnology derived. Innovation should be the lifeblood of the industry, and patients want new treatments for hitherto unmet needs.
We have made such huge strides in therapeutics in recent years, that patients expect us to carry on knocking down targets such as cancer and Parkinson's disease. The former is no longer necessarily a death sentence, and the latter can be controlled in increasing numbers of patients with the advent of better ways of delivering dopaminergic therapy. Even HIV can be stabilised for years without progression to AIDS. Continuing to meet the expectations that we have effectively created will be a major challenge.
So, if innovation is experiencing a downturn, the industry right now has to make the best of what it has. If a company has fewer potential revenue earners, it is even more critical to get them to market earlier. Let's have a look at where the problems might lie. Of all the R&D stages, clinical trials absorb by far the largest slice of resources at 35% of the total.
The mean duration of a single trial is more than two years. Of the generally accepted milestones within phase II and III trials, between 2000 and 2004, only data clean-up improved significantly by just over 10%. Patient enrolment time increased by 25%, thereby contributing the major part of an overall increase in trial duration of 10%. It seems clear, therefore, that clinical trials should be a major target for improvement.
Lessons to be learned
I can't pass up the opportunity to tell a small story about the patient enrolment issue, which bedevils every clinical research manager. A major company had set some quite aggressive targets for improving cycle time for the whole clinical trials operation. They were quite good at measuring what they did, so they generated metrics for all the generally recognised stages of a trial and aggregated these into performance indicators.
The good news was that they achieved the overall target they had set themselves, and trials were actually completed more quickly. But things didn't work out as they had expected. They quite rightly saw that patient enrolment was a problem, and put huge effort into improving that, while also striving to improve the other stages. To their surprise, enrolment didn't improve, but all the other stages did, enabling the overall target to be achieved.
What is the lesson from this? I think there is more than one. First, there is the need to take a holistic look at the whole process, and not just agonise over the one problem that is a perennial one. Then, it's worth considering which targets are within our control and which are not as easy to control. This company found they could not have much impact on enrolment (although maybe they stabilised it rather than allowed it to get worse), and made major improvements to the processes that they carried out in-house. Most importantly, they could only see this improvement by having effective metrics for their processes.
Much more recently, I was exposed to a highly complex project management system at another large company. The cost of implementing it must have been huge. I asked what impact it was having on clinical trial metrics two years after roll-out, and the answer was that the company had no idea as they had never measured anything before committing to the new system. Hadn't they heard of a business case?
Management failure
Within the space I have left I can't analyse in detail what is going wrong, or provide the magic bullet that will remedy all the industry's woes, nor do I have the easy answer. So, please bear with me while I do a bit of rather unscientific speculation. I'll stay largely within the clinical trials topic, because it's my territory and it's the part of the R & D pathway that's most critical for cost and time.
Over more than 30 years, I have seen projects fail because of faulty science or drugs that, frankly, dont work, but my impression is that they fail much more often because of bad management. When I say fail, I mean that they miss one or more of their key targets of time, cost and deliverables (including scope and quality).
The vast majority of drug development professionals are technically sound and very well qualified academically. If there is a competence gap, it seems to be in management. This will have raised the hackles among many excellent drug development project managers, but I'll defend my statement with some comparisons with best practice in non-pharmaceutical companies that have high technology products.
Project management is a discipline that grew up in industries like engineering, construction, and IT. It has its roots around 1915, got second wind in the 1950s and 1960s, and has only really penetrated pharmaceutical companies in the last 20 years. So well-established is project management in these other industries, that the discipline is currently looking at the maturity of how they practise it.
They all do it, some better than others, and best practice is now defined in various external standards.
Some of you will be familiar with some of these, such as PRINCE2 and APM Body of Knowledge from the Association for Project Management. I regularly meet project managers from outside pharmaceuticals, and these are my impressions of how they differ from our own.
Planning is crucial
Non-pharmaceutical projects also differ in many other ways. I find that pre-project planning and evaluation typically take about twice as long as we allow for clinical trials. The benefit is that risk of failure is greatly reduced when plans are more realistic, and risk analysis has been done in advance. With so much work being contracted out now, we still have quite a lot to learn from the building industry, where projects consist of huge networks of subcontractors.
For any such project, the purchasing plan is a major part of the overall project plan, and is written in detail. Yet when working as an interim project manager, I always find myself pitched into a new study with minimal preparation time allowed, so these key components can rarely be implemented. It is even common to be working on deliverables for a completely new study within days of appointment as project manager.
I am not in any way claiming that project management is being ignored by our industry, but in view of the clear trends in development times, it certainly needs to be revisited. If it is really taking an extra two years to get to market, a major product could be losing half a billion dollars compared with 10 years ago – equivalent probably to its whole R&D budget. It would be very nice to be able to plough that back into discovering new innovative products.
Companies should, however, avoid trying to run before they can walk. It is very easy to be seduced by complex approaches which are difficult to implement (and usually very expensive), just because they seem to be cutting-edge. It is far better to set up simple methodologies and do them well. That will put you at the business cutting-edge compared with your competitors.
One of the key actions for top management is to re-evaluate the role of their project managers. Are they really empowered? Are they properly trained?
The metrics I gave you earlier are, of course, not quite up-to-date. The new version of CMR's Factbook will appear around the time you read this, so we will all be interested to see whether the trends are still the same but, I'm not expecting too many surprises.
Les Rose is a freelance writer and clinical science consultant with Pharmavision Consulting. For more information e-mail: lesrose@ntlworld.com
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