Report: ‘R&D isn’t paying’
On average, the world’s biggest pharma companies are not getting enough of a return out of their R&D efforts, according to a new report by Deloitte and Thomson Reuters.
The new research, the fourth in an annual series, looks at data from Amgen, AstraZeneca, Bristol-Myers Squibb, Eli Lilly, GlaxoSmithKline, Johnson & Johnson, Merck & Co, Novartis, Pfizer, Roche, Sanofi and Takeda.
The projected return on investment from that group of manufacturers’ pipelines has declined over the past four years, from 10.5% in 2010 to 4.8% in 2013.
They are also losing too much money in wasted effort through abandoning drugs at a late stage of development – this has cost a whopping $243 billion over the same period, the report finds.
While the conclusions may be of concern to some of the 12 companies, not all are in the same boat, with ‘wide variations’ in performance, the research suggests – but the individual companies’ figures are not pulled out for scrutiny.
“Some companies are achieving higher rates of return and others are struggling to safeguard growth,” the researchers say.
Although the number of late-stage compounds that the firms have has remained stable since 2010, the amount of money they expect to make from them has dipped significantly – from $1,369 billion overall to $913 billion.
The 12 companies have launched 105 products since 2010, with a projected value of $770 billion, and 167 compounds have been put into late-stage development with a total risk-adjusted value of $819 billion.
But the average forecast for the peak sales of a drug has dropped by 43%, from $816 million in 2010 to $466 million in 2013.
The report’s authors recommend that to reverse this trend, pharma has to put more work into R&D and identifies three key area: maximising the value of science, preserving and developing R&D talent – and making better use of analytics to decide which projects to advance.
The report also states that the cost of bringing a brand from discovery to market has increased 18% over the four years from $1.1 billion in 2010, to $1.3 billion in 2013.
This type of figure – around $1 billion – is often quoted by the pharma industry and is supported by the ABPI (which in fact says it costs £1.15 billion – pounds not dollars) to do the necessary R&D, with The Office of Health Economics putting the cost per new medicine higher still, at £1.2 billion.
However, earlier this year Sir Andrew Witty, chief executive of GSK, memorably disputed this by saying that the $1 billion price tag is ‘one of the great myths of the industry’.
Either way, the new research does not hold out many crumbs of comfort for pharma as a whole: “Although the adverse global economic climate appears to be easing, market conditions are likely to continue to prove challenging for life sciences companies,” it says.
“Payers will continue to apply downward pressure on price, with premium pricing reserved for the few, truly innovative drugs that can demonstrate improvements over existing therapies,” the report concludes.
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