How to Save Your Drug Company

Apr 01, 2010
By Pharmaceutical Executive Editors

"Industry is caught in a pincer between [a drug] output that is essentially linear, and likely to remain so, and a cost of producing [drugs] that is increasing exponentially. At some point, the situation will become untenable. This could tempt investors to force wholesale change onto the industry unless the industry pre-empts them with radical initiatives." So concludes Bernard Munos, a strategic advisor at Eli Lilly, in a recent Nature Reviews article on drug discovery. "Lessons from 60 years of Pharmaceutical Innovation" is a deep statistical dive into the performance of the integrated R&D model from 1950 to 2008, delivering an iconoclastic analysis, supported by surprising facts and provocative recommendations. Here we offer Munos' four main takeaways. To read the entire study, go to —WA


Figure 1: FDA approvals of new drugs, 1950–2008

Figure 1
Since 1950, a total of 1,222 new drugs (1,103 small molecules, 119 biologics) have come to market. The annual rate has remained surprisingly constant, except for a 15-year bump that peaked in 1996 when there were 51 approvals—a result of FDA clearing its big backlog. This long view contradicts received wisdom that productivity is cyclically depressed. "If nothing that drug companies have done in the past 60 years has succeeded in raising mean annual output, there is not a high probability that established strategies will change this now," Munos writes. "This suggests that this output … reflect[s] the innovative capacity of the established R&D model."


Figure 2: Estimates of development cost of a new drug, 1950–2008

Figure 2
The industry's annual investment in R&D has grown dramatically over six decades, reaching $50 billion in 2008. Recently, the cost of bringing a single new drug to market has more than doubled, from $1.754 billion in 2000 to $3.911 billion (adjusted for post-approval R&D, new indications, non-US approvals; success rate; inflation; regulatory cost increases). Only 27 percent of all new drugs cost less than $1 billion to develop, while only 21 percent become blockbusters—a rate that has not improved over 20 years, despite the increasingly sophisticated sales forecasts and market analyses to increase predictions of success. This cost-to-productivity ratio is inadequate to secure the future of the industry, says Munos.

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