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It is known that the costs related with drug research and development (R&D) and the timelines to develop a new drug increased over the past years. In parallel, the success rates of drug projects along the pharmaceutical R&D phases are still very low, and the outcome of all R&D efforts is stagnating. In consequence, the R&D efficiency defined as the financial investment per drug has been steadily decreasing. As innovation is the major growth driver of the pharmaceutical industry, reliable data on R&D efficiency and new concepts to overcome these challenges are of great interest for R&D managers and the sustainability of the pharmaceutical industry as a whole. This book chapter reviews publications on R&D performance indicators of the past years, such as the success rates and timelines per phase. Additionally, it illustrates the factors influencing the success rates, timelines, and costs of pharmaceutical R&D most and, thus, the denominators of the R&D efficiency.
The efficiency of pharmaceutical research and development (R&D) reflected by increasing costs of R&D, long timelines, and low probabilities of technical and regulatory success decreased continuously in the past years. Today, the costs for discovering and developing a new drug are enormously high with more than USD 2 billion per new molecular entity (NME), while the average overall success of a research project to provide an NME is in the single-digit percentage rate, and the total timelines of R&D easily exceeds 10 years questioning the return on investment (ROI) of pharmaceutical R&D. As a consequence and also caused by numerous patent expirations of blockbuster drugs that increased the pressure to return to an acceptable ROI, the pharmaceutical industry addressed this challenge and the related causes and identified several actions that need to be taken to increase the output/input ratio of R&D. This book chapter will review the pipeline sizes and the R&D investments of multinational pharmaceutical companies, will describe new processes that have been implemented to increase the reach and to reduce costs of pharmaceutical R&D, and it will illustrate new innovation models that were developed to increase the R&D efficiency.
New drugs serving unmet medical needs are one of the key value drivers of research-based pharmaceutical companies. The efficiency of research and development (R&D), defined as the successful approval and launch of new medicines (output) in the rate of the monetary investments required for R&D (input), has declined since decades. We aimed to identify, analyze and describe the factors that impact the R&D efficiency. Based on publicly available information, we reviewed the R&D models of major research-based pharmaceutical companies and analyzed the key challenges and success factors of a sustainable R&D output. We calculated that the R&D efficiencies of major research-based pharmaceutical companies were in the range of USD 3.2–32.3 billion (2006–2014). As these numbers challenge the model of an innovation-driven pharmaceutical industry, we analyzed the concepts that companies are following to increase their R&D efficiencies: (A) Activities to reduce portfolio and project risk, (B) activities to reduce R&D costs, and (C) activities to increase the innovation potential. While category A comprises measures such as portfolio management and licensing, measures grouped in category B are outsourcing and risk-sharing in late-stage development. Companies made diverse steps to increase their innovation potential and open innovation, exemplified by open source, innovation centers, or crowdsourcing, plays a key role in doing so. In conclusion, research-based pharmaceutical companies need to be aware of the key factors, which impact the rate of innovation, R&D cost and probability of success. Depending on their company strategy and their R&D set-up they can opt for one of the following open innovators: knowledge creator, knowledge integrator or knowledge leverager.