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R&D in Transition
Research and development is the lifeblood of the bio/pharmaceutical industry. While lifecycle strategies and novel delivery systems can lessen revenue declines in the wake of patent expirations, drug companies can survive for only so long on reformulating older products. The industry must be able to introduce new therapies to maintain its growth and profitability. The pressure on bio/pharmaceutical companies’ R&D operations has never been greater. Companies need successful new products to rekindle growth and stem the loss of revenues and jobs following patent expirations. Because new clinical science is producing products that are more targeted than the broad market blockbusters they are replacing, R&D laboratories must produce a larger number of new products than ever before.
What is behind the apparent decline in R&D activity? It seems to be the confluence of a number of events that has upset R&D productivity, such as:
Whether the decline in R&D activity is permanent or transitory is a crucial question for the entire bio/pharmaceutical industry, and especially for CROs and CDMOs that support research and development. If R&D doesn’t rebound, the growth prospects of R&D services providers will suffer, and even commercial CMOs will see fewer opportunities coming their way.
The future of R&D
Two factors, however, will continue to create strong headwinds for the growth of R&D: payers will continue to demand demonstrable efficacy and cost advantages for new drugs and the cost of R&D to demonstrate therapeutic value and cost-effectiveness will continue to escalate.
Those new demands will create new opportunities and challenges for CDMOs and CROs. The opportunities come from bio/pharmaceutical companies seeking to control R&D costs by turning to contract service providers, the costs of which can be made variable, over in-house capabilities whose costs are fixed. Benefits will also accrue to CDMOs and CROs that can come up with innovative, cost-effective solutions to the problem of controlling R&D costs.
The challenges will arise from the pressures on prices and margins as bio/pharmaceutical companies seek to negotiate better terms to manage their costs. They will also come from the continuous churn in projects as R&D programs are cancelled when they don’t meet the raised performance hurdles.
CDMOs and CROs that expect a continuation of the “good old days” of the mid-2000s are not facing the realities of today’s bio/pharmaceutical research and development environment. The world has changed forever, and service providers need to face up to the new realities.
About the Author
Jim Miller is president of PharmSource Information Services, Inc., and publisher of Bio/Pharmaceutical Outsourcing Report, tel. 703.383.4903, Twitter@JimPharmSource, firstname.lastname@example.org, www.pharmsource.com.