Pharmaceutical Research and Development (R&D) productivity is perceived to be in trouble. Despite the surge in R&D spending, there was no productive output. Pharma faces an industry-wide pipeline crunch, coupled with patent expiry on key products and ever-increasing drug development costs. What might trigger the revival of this sector? Strategy of in-house drug development or strategy of Mergers and Acquisitions (M&As)? Or lookout for blockbusters to keep the industry afloat? Can the pharma sector build on the momentum it has gained in recent years and leave an indelible footprint?
In 1998, when the pharmaceutical industry was soaring, PricewaterhouseCoopers predicted crippling of the industry with falling productivity and rapidly diminishing total shareholder returns. They were ridiculed then, but in the present scenario the prediction is coming true. In spite of covering 60% of the market the industry is facing an impact of slow growth.
The process of drug discovery, development and marketing is a fiercely competitive one and requires huge investments in terms of time and money. The industry is also fraught with a great deal of uncertainty. Huge amount of money is expended yearly on research in the hope of discovering blockbuster drugs so that the companies can earn maximum returns. Unfortunately, the returns are hardly noteworthy. The fortune of any pharmaceutical company is directly linked to its success in releasing new products more efficiently than the competitors.
R&D spending is not generating the same rate of new product flow as in the past. Despite the surge in R&D spending, the number of medicines introduced worldwide dropped from an average of over 60 a year in the late 1980s to 52 in 1991 and only 31 in 2001. The overall number of new active substance undergoing regulatory review is still falling. |
