It’s well accepted that pharmaceutical R&D productivity has fallen, with new drug approvals trending downward even as costs trend up. Companies are taking some actions: rationalizing costs, increasing outsourcing, collaborating with academic institutions, increasing their focus on specific disease areas, reconfiguring their organizations. But is that enough?
Admittedly, it is difficult to press the panic button when pharma companies’ net income sits at 20 to 30 percent and the industry has sustained six percent annual growth over the past five years despite a pronounced global economic downturn. But in our view, positive earnings and scattered signs of change mask more fundamental problems.
In this paper, we will explore those problems. We will put a number on just how far R&D productivity has fallen. (The answer, a shocking one, we think, is more than 70 percent.) We will show how the current industry mindset for drug development has become mismatched with the realities of the marketplace, and we will portray a new mindset that we believe must stand behind any serious attempt to make pharma companies creative, productive, and profitable in a rapidly evolving new era.