Drug industry urged to focus spending on R&D

Pharmaceutical companies must shift their investment focus from marketing to research and development, according to a new report issued by PricewaterhouseCoopers. The survey also advises drugmakers to more closely link drug prices to therapeutic efficacy in the next five years, or face an uncertain future, according to an article in the UK's Financial Times.

In "Pharma 2020: the vision," PwC questions the sustainability of current pharmaceutical industry business models, arguing that they are unable to respond to new demands for innovative treatments in a timely manner. The report stresses that recent increased investment in drug development will struggle to compensate for financial losses related to products that will lose patent protection over the next few years. It revealed that, in the period 1995 to 2005, R&D spending by the leading companies only increased 2% to around 17.1% of total expenditure, while sales and administration costs have grown to 33.1% from 28.7% in the same period.

PwC also cautioned that performance in the industry as a whole, as well as its public reputation, has slumped, and forecast a private equity take over of a large drug firm in the next 13 years. PwC concluded that drugmakers will increasingly shift from linear R&D programs to "live licenses" which are more adaptive and better able to respond to the need for new medications and a changing business environment. The firm also called for changes to intellectual property laws to offer more rewards for innovative developers, to expedite such a paradigm shift.