Study: Forget the 'Blockbusters'

A study whose results were reported December 8 asserts that the pharmaceutical industry's “blockbuster” approach to developing new drugs is no longer viable in today's marketplace. The study, conducted by Bain & Co., a business consulting firm with offices in 19 countries, found that the costs for discovering, developing and launching each new drug had risen to $1.7 billion, an increase of 55% over the average costs for the 5 years from 1995 to 2000. Driving costs upward, the study reports, are declining R&D productivity (one drug compound for every 13 discovered and placed in clinical trials now makes it to market, compared to one in eight between 1995 and 2000), rising costs of commercialization, increasing payor influence (including aggressive patent challenges) and shorter exclusivity periods. These rising costs are expected to drive down investment returns.

One of the co-authors of the study, Ashish Singh, director of Bain's Global Healthcare Practice, opines that large pharmaceutical concerns will need to abandon their present drug development models if they are to remain competitive, but they have thus far failed to do so because they are “prisoner[s] of past successes.” The study suggests that a better strategy for pharmaceutical product development would include increased use of partnerships to spread risk, a more customer-driven approach and development of a more decentralized organizational model based on discrete business units.

For more information, see the Bain Web site at www.Bain.com.