A new report from Oliver Wyman puts numbers to the dismal trend seen in Big Pharma R&D from 2005-2010 as compared to "boom" years of 1996-2004. The down period was named the "drought" years and some of the more disturbing statistics appear below:
- R&D spending doubled to an average of $125 billion during the drought period, from $65 billion in better times. And the ROI dropped like a stone to an average of $75 million in sales during a product's fifth year for every $1 billion spent on R&D, down dramatically from $275 million in better days.
- The development drought also led to a declining economic value of approved drugs, to an average $430 million from $515 million.
- Drug approval itself plunged about 40% in the dry years, amounting to 22 FDA approvals per year on average, versus 36 in the better years.
- Drugs produced an average of $9.4 billion in fifth-year sales in the dry period, half of the $18.3 billion during the more productive years. Fewer blockbusters and fewer new drugs overall contributed.
- In all, 17 of the 20 companies faced productivity declines, though Novo Nordisk, Bristol-Myers Squibb and Johnson & Johnson did better than most. Dips in high levels of productivity hit everyone though.
What to do about it?
The paper's authors recommend raising standards for product innovation and working more closely with payers as they face pressures to hold down costs. They also want companies to treat new compounds as rare (don't take development success for granted), with focused investments that don't rely as much on speed to market, .i.e. actually create better products and understand more about their mechanism of action in treating disease.
Another recommendation: Play to win. This means using strategies like closely assessing the competition (to create novel products), seeking alternative financing and joint R&D efforts with other parties (including rival drug makers), and making everyone focus more on business development. (See Fierce Biotech).
Posted by Bruce Lehr Dec 4th 2011.