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The value of every dollar invested in pharmaceutical R&D has shrunk by more than 70% in recent years. This is the data that emerges from a research just published by the international consultancy firm Oliver Wyman, which examined the 450 new chemical entities approved by the FDA during the period 1996-2010. This period was divided into two parts, 1996-2004 and 2005-2010. The former is considered the era of abundance and the latter that of scarcity. Watershed between the two periods: the withdrawal of rofecoxib which took place in September 2004 which led the FDA to implement a series of much more accurate controls.
The differences observed in the two periods are numerous, first of all the number of new drugs (new molecular entities, NMEs) approved by the American agency fell by 40%, from an average of 36 per year in the era of plenty to only 22 per year year in the following period.
Then, the report evaluated the economic value of new drugs by measuring it through a parameter used quite commonly in these cases, namely the value of sales in the fifth year of marketing a drug. For very recent drugs, the sales forecasts developed by the specialized company EvaluatePharma were used. This figure dropped from $515 million in the first period to $430 million, a reduction of 15%. Considering fewer approved drugs and their lower economic returns, the overall fifth-year revenue figure dropped from $18.3 billion to $9.4 billion, a decline of nearly 50%.
But the report continues and also provides us with very negative data on the productivity of pharmaceutical research. Over the two time periods considered, annual R&D expenditures by pharmaceutical companies rose from $65 billion to $125 billion, practically doubling.
Comparing research expenses with the revenues generated in the fifth year of marketing, it can be seen that for every billion dollars spent on research, companies previously recovered 275 million dollars in sales and now only 75 million, a very sharp drop, equal to 73% in less.
According to Jerry Cacciotti, partner at Oliver Wyman, pharmaceutical companies have made big improvements and in many cases the net profits have remained almost unchanged. However, this should not mislead because the same companies are succeeding or much less well in doing their main job, i.e. placing innovative drugs on the market in such a way as to remunerate the invested capital adequately.
Of the 20 pharmaceutical companies surveyed, 17 saw a decline in research productivity and only three saw an increase. It's about Novo Nordisk, Bristol-Myers Squibb and Johnson & Joh
The differences observed in the two periods are numerous, first of all the number of new drugs (new molecular entities, NMEs) approved by the American agency fell by 40%, from an average of 36 per year in the era of plenty to only 22 per year year in the following period.
Then, the report evaluated the economic value of new drugs by measuring it through a parameter used quite commonly in these cases, namely the value of sales in the fifth year of marketing a drug. For very recent drugs, the sales forecasts developed by the specialized company EvaluatePharma were used. This figure dropped from $515 million in the first period to $430 million, a reduction of 15%. Considering fewer approved drugs and their lower economic returns, the overall fifth-year revenue figure dropped from $18.3 billion to $9.4 billion, a decline of nearly 50%.
But the report continues and also provides us with very negative data on the productivity of pharmaceutical research. Over the two time periods considered, annual R&D expenditures by pharmaceutical companies rose from $65 billion to $125 billion, practically doubling.
Comparing research expenses with the revenues generated in the fifth year of marketing, it can be seen that for every billion dollars spent on research, companies previously recovered 275 million dollars in sales and now only 75 million, a very sharp drop, equal to 73% in less.
According to Jerry Cacciotti, partner at Oliver Wyman, pharmaceutical companies have made big improvements and in many cases the net profits have remained almost unchanged. However, this should not mislead because the same companies are succeeding or much less well in doing their main job, i.e. placing innovative drugs on the market in such a way as to remunerate the invested capital adequately.
Of the 20 pharmaceutical companies surveyed, 17 saw a decline in research productivity and only three saw an increase. It's about Novo Nordisk, Bristol-Myers Squibb and Johnson & Joh
