Low research and development (R&D) productivity, combined with the patent cliff and a stringent US Food and Drug Administration approval process, is resulting in climbing expenditure without the corresponding output, states the latest report from industry experts GBI Research.
The company’s new report says that, despite efforts made by pharmaceutical firms to cut down on costs, R&D expenditure expanded at a compound annual growth rate (CAGR) of 6% from $26 billion in 2000 to $50 billion by the end of 2011. Conversely, the number of new molecular entities (NME) approved during this same period has dropped on average, decreasing at a CAGR of 1%.
R&D is a core and integral part of the pharmaceutical industry, but poor productivity means there may soon be a drought in the R&D pipeline. GBI Research estimates that currently as much as 55% of the entire late-stage pipeline is made up of life cycle management (LCM) projects, while a 28% share of the industry’s top 20 companies’ pipelines is devoted to LCM research.
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