Try outsourcing to control spiralling R&D budgets
the rising costs of the R&D process - and outsourcing may well
be the best route, according to Dr Faiz Kermani, a specialist in
outsourcing and research development.
Dr Kermani - who works for leading independent clinical research organisation Chiltern International - says that the problem stems from rising clinical development costs. In 2000, the global pharmaceutical industry was estimated to have spent $58 billion (€48bn) on R&D, with around 40 per cent of this being devoted to clinical trials.
"The cost of new drug development has been rising steadily since the 1970s," he explained. "In 2001, the Tufts Centre for the Study of Drug Development estimated the cost of successfully getting a drug to market was approximately $802 million; a second report issued in 2003 suggested that this figure had increased to $897 million."
In contrast, the consulting company Bain & Company recently proposed a figure of $1.7 billion as the actual cost of successfully launching a new drug. A major difference between these two analyses is that Bain factors in the expense of commercialising a new drug, whereas the Tufts CSDD figure focuses chiefly on R&D expenses.
A variety of studies have demonstrated that expenditure on clinical development does account for a growing portion of total R&D investment. Tufts CSDD estimate that although total average (preclinical plus clinical) costs increased 5.8 times between the 1970s and 1990s, the corresponding clinical costs increased 8.6 times.
Companies involved in novel drug development frequently experience a heavy increase in expenditure when their compounds reach clinical trials. In its 2002 survey of its US-based member companies, the Pharmaceutical Research and Manufacturers of America (PhRMA) noted that the inflation-adjusted increases in clinical R&D costs were more than five times greater than the costs for preclinical work.
"The key lesson from this is one of selection," added Dr Kermani. "Project selection and prioritisation, before entry into the development process, is therefore an important decision point."
He also believes the rising costs of clinical trials are affecting R&D strategies and the manner in which companies operate.
"A good example of this would be the number of Japanese companies have sought to carry out their clinical studies abroad, taking advantage of the lower costs and larger market size."
If this becomes an industry trend, he noted, it would have significant implications for Japan as an R&D base since Japanese companies have shown a strong commitment to clinical research.
Drug discovery technologies such as combinatorial chemistry, high throughput screening and genomics are resulting in an increasing number of new compounds with the potential to enter clinical development. Much will therefore depend on the decision-making process used to evaluate what compounds progress to clinical trials. Inevitably, the rising costs of clinical development are an important factor in this assessment.
"Outsourcing is one obvious solution," according to Dr Kermani. "As clinical development is expensive and risk-intensive, companies involved in drug development have genuinely improved their options for success by outsourcing to CROs," he claimed.
He cited as evidence an analysis of the US pharmaceutical industry by UBS Warburg. This revealed that of the $30 billion that the US pharmaceutical industry invested in R&D in 2001 up to a quarter was spent on outsourcing.
