New era in pharma innovation means major challenges for the industry; study

The value generated by a dollar invested in pharmaceutical research and development has fallen by more than 70% in recent years, according to a new study from the consulting firm Oliver Wyman.

The study, titled Beyond the Shadow of a Drought: The Need for a New Mindset in Pharma R&D, looked at the 450 new drugs (new molecular entities, or NMEs) approved by the U.S. Food and Drug Administration between 1996 and 2010. The analysis determined that this period fell into an Era of Abundance from 1996 to 2004 and an Era of Scarcity from 2005 to 2010. There were striking differences between the two eras:

• Fewer new drugs: In the Era of Abundance, an average of 36 NMEs were approved per year. In the Era of Scarcity, the average was 22 - a drop of 40%. “The decline in the number of NMEs approved is well established,” says Jeff Hewitt, a partner in Oliver Wyman’s Health and Life Sciences practice and one of the study’s authors, adding: “But it is usually thought of as a continual decline. We thought the data showed two distinct periods, roughly demarcated by the Vioxx withdrawal in September 2004.”