OR WAIT null SECS
© 2023 MJH Life Sciences™ and Pharmaceutical Technology. All rights reserved.
According to a Deloitte report, the industry’s return on its research investment has been steadily slipping for the past six years. The conclusion? Fundamental change may no longer be a given, but a necessity for the industry
In “Balancing the R&D Equation: Measuring the Return from Pharmaceutical Innovation,” its latest look at the return on investment (ROI) from pharmaceutical R&D, Deloitte analysts have found that the industry’s ROI for research has continued to slip. The researchers have been examining these trends since 2010.
Since 2015, the report states, the costs of launching a new drug have remained near where they were during the heyday of the blockbuster, at $1.539 billion, 30% above where they were six years ago. A three-fold improvement in productivity would be needed to restore balance the imbalance between investments and sales, Deloitte analysts say. According to the study, the ROI of pharma R&D has dropped from 10.1% in 2010 to 3.7% in 2016, and peak sales have fallen by 11.4% each year since 2010.
In studying these trends, Deloitte has focused on 12 Big Pharma companies, but added four mid-to-large companies last year, noting that the smaller companies outperformed the original 12 on all key performance indicators.
Market conditions promise to make it increasingly challenging to improve ROI, the study suggests. For one thing, mergers and acquisitions, after slowing down from 2013 through 2016, may be poised for an increase. These alliances, designed to add value, also put companies under increased pressure, and add to complexity in managing data, in cases where legacy systems clash with acquired platforms.
“The explosion of genomics data, patient-generated data from wearables during clinical trials, and real-world evidence data is both the biggest asset for biopharma, and also a considerable liability,” the analysts write. The key to solving this problem will be moving from a siloed to an integrated approach, and ensuring that the right information is accessible to the right people at the right time. In some cases, Deloitte’s surveys of industry professionals showed, the individuals who might have benefitted most from specific data within an organization did not even know that it existed.”
Outsourcing has also had a negative impact on efficiency, Deloitte’s report states, because contract partners place more distance between patients and sponsors. The analysts suggest that more companies treat their contract partners like strategic allies, and part of their own companies. “It is important to build a rapport with partners in order to achieve effective communication, transparency and aligned incentives,” they write. In addition, they urge contract organizations to realize more of their potential for delivering efficiencies, by adopting better partner management practice and operating models that encourage externalization, where possible.
Another suggestion from Deloitte is to adopt some of the best business practices of smaller companies. “Scale acts as a barrier to creating value within an R&D organization,” the analysts write.
Among other best practices include the suggestion that companies accept risk, fail fast when they fail, and embed a more dynamic, “stage-gate” approach into the way they fund research projects.