LONDON—Fewer than two in 10 medicines exceed the average pharmaceutical R&D cost required to bring a drug to market when the risks of failure to reach market approval are factored in, according to business intelligence provider GBI Research.

 

The company’s latest report states that, across the pharmaceutical industry, a product entering into clinical development has a 72-percent likelihood of failing to reach the market across any of the indications for which it is in development. On top of this, it is widely understood that bringing drugs to market is becoming increasingly expensive.

 

“The growth in drug development costs has been attributed to higher failure rates for drugs tested in clinical trials. Additionally, a range of factors are thought to have increased clinical trial costs, including increased trial complexity, larger average trial sizes, higher costs of inputs from the medical sector and increased targeting of chronic and degenerative diseases,” according to Dominic Trewartha, a managing analyst for GBI Research. “Overall, these higher costs appear to stem from an increased clinical failure rate and emphasis on proving superiority over comparator drugs in healthcare technology assessments, as well as an increasing level of sophistication from payers when assessing the cost-effectiveness of drugs. The additional trials needed to provide adequate evidence of a drug’s efficacy have significantly added to the cost of development.”

 

Due to growing R&D costs and the limited lifecycles of patented drug products, it is imperative that pharmaceutical companies maximize annual product revenue following market approval and maximize the lifecycles of their drugs, primarily by minimizing the impact of generic entry.

 

Trewartha concludes: “First-in-class innovation is a key strategy that companies have been employing to achieve these imperatives. Over recent decades, in addition to an increase in the yearly number of new chemical entity approvals by the FDA, the number of first-in-class products also increased. Indeed, the proportion of first-in-class approvals has increased steadily each year since 1994.”