New Report Highlights Need to Reduce R&D Cost

Most pharmaceutical and biotechnology companies already feel the pressure to reduce their R&D costs. A recent report showing a decline in the ROI for R&D among some of the world's biggest companies is not going to ease the pressure.

A report by Deloitte and Thomson Reuters shows that the average rate of return from R&D in 2012 among the world's top 12 pharmaceutical and biotechnology companies was 7.2 percent-down from 7.7 percent in 2011 and 10.5 percent in 2010.

The report (""Measuring the Return from Pharmaceutical Innovation 2012: Is R&D Earning Its Investment?"") analyzes the top 12 publicly listed pharmaceutical and biotechnology companies with the highest R&D spending. Analysis was based on projected financial returns from their investment in the late-stage pipelines. All calculations were made in U.S. dollars. The report was released late last year.

Among the top 12 companies, there was an increase in the number of new drugs approved, but the total forecast sales revenues of new approvals fell. The group had 41 new drugs approved, with combined forecast revenues of $211 billion- compared with 32 new drugs with expected revenues of $309 billion from the previous year.

Notable Findings

Other notable findings include:

• Between 2010 and 2012, the average cost of developing a new drug has increased from $1 billion to $1.1 billion in 2012. Among the top 12 companies, drug development cost ranged from $315 million to $2.8 billion.

• The number of terminations of failed projects remained static at 19 in 2010-2011 and 22 in 2011-2012. Revenue lost due to late-stage terminations was $73 billion in 2010-2011 and $77 billion in 2011-2012. ""Repositioning or repurposing is one avenue that could be used to recoup a proportion of sunk R&D from failed compounds,"" said the report.

Reducing Cycle Times is Key

Now more than ever, pharmaceutical and biotechnology companies have to find new ways to reduce R&D costs, including reducing cycle times. The report said cycle times can be shortened through more ""focused governance, process improvement, or more selective disease area strategies.""

Here are some of the report's recommendations for reducing cycle times.

• Applying lean process improvement to reduce the white space between development phases and shorten the critical path.

• Improve clinical trial participants and investigator selection through developing and enhancing relationships with healthcare providers.

• The use of digital technology to get closer to patients, and thereby accelerate clinical trial recruitment and reduce trial cost per patient.

While some companies persist in using paper or hybrid quality processes, now may be the best time to consider switching to a fully electronic quality management system. For example, ""applying lean process improvement"" and ""use of digital technology"" to accelerate clinical trial recruitment can be more readily achieved with the help of an automated system.

Sponsors that use CROs can collaborate more efficiently if they share an electronic platform, or if they can at least establish connectivity in the critical processes such as deviation and CAPA. The same platform can be used to manage the activities and performance of the CRO and clinical trial sites, as well as in conducting audits and assessing CRO performance.

The report's emphasis on reducing cycle times highlights how critical time is in containing overall R&D cost. For companies still using paper or hybrid systems, transitioning to a fully automated system is certainly worth looking into now more than ever.