The value of improving the productivity of the drug development process: faster times and better decisions

Abstract

Objectives: This study examines the financial benefits that can accrue to drug developers from improvements in the drug development process. The effect on drug development costs from faster development, earlier decisions on project failures, and higher approval success rates are quantified.

Data and methods: The results from a recent study of research and development (R&D) costs for new drugs are used as a benchmark against which improvements in the discovery and development processes are simulated. The cost results in the benchmark study were based on a sample of 68 randomly selected investigational drugs from 10 pharmaceutical firms.

Results: Simultaneous 25% reductions in phase lengths lower capitalized total cost per approved drug by 16%, or $US129 million; 50% reductions in time lower cost by 29%, or $US235 million. Earlier decisions to terminate research on drugs that will ultimately fail significantly reduce clinical costs. For example, shifting 5% of all clinical failures from phase III/regulatory review to phase I reduces out-of-pocket clinical costs by 5.5 to 7.1%; and capitalized clinical cost is lowered by 5.1 to 6.3%. If more productive discovery programmes or better preclinical screens increase success rates from 21.5% to one in three, firms can reduce capitalized total cost per approved drug by $US221 million to $US242 million.

Conclusions: Whether faster development times, quicker termination decisions or higher success rates derive from public policy initiatives, better management, or new technologies, the impact on R&D costs can be substantial. Ultimately, the increased efficiency could result in more innovation and new therapies reaching patients sooner.