Trends in R&D: The Widening Gap between Success and Failure

The Office of Health Economics (OHE) has released a new study examining drug development costs over the past 30 years. The study finds that out-of-pocket costs to bring a new medicine to market have increased over this period by 600%, success rates from proof of concept to registration have decreased at least twofold since the 1980s, with overall development more than doubling, from six years in the 1970s to 13.5 years in the 2000s. The most significant factors behind these sobering findings include drug companies going after increasingly complex and chronic conditions, regulators having developed more risk-averse approaches to approval, and various technological shifts making their disruptive way into the R&D schedule.

The OHE found that the average total R&D expenditure for a drug was $1 billion in early 2000s, but today has reached $1.5 billion. Current out-of-pocket development costs average $215-220 million. The study attributes the increase in out-of-pocket spending to cost per patient and number of patients in clinical trials, as well as an overall increasing complexity in trials. Drug companies have attempted to reduce costs by increasing their outsourcing to contract research organizations (CROs) in order to increase efficiency, as well as conducting clinical trials in emerging markets where costs are lower and patients are more easily recruited. But until regulatory conditions are strong, expertise is prevalent, and adequate infrastructure exists to support a rich clinical environment within these developing countries, the bulk of research remains in Europe and the US.  These are precisely the regions where cost is a more urgent concern.

Success rates for drugs have declined.  While one in five drugs in the 1980s went on to be successful, the 2000s saw only one of every ten medicines makes it through the gauntlet of clinical trials and subsequent approval. However, success rates for individual trial phases have remained stable since the 1990s. With regulatory hurdles making it more difficult, and as drugmakers prioritize in developing medicines for notoriously challenging areas such as respiratory, neurological and cancer illnesses,  it’s easy to see why failure has become twice as prevalent today than 30 years ago.

OHE found that more R&D failures are to be expected in the near term because of the onerous process of integrating new add-on technologies such as companion diagnostics and biomarkers into the R&D paradigm. The study optimistically points to initiatives already set in motion to drive up success rates including better preclinical screening, earlier involvement of health technology assessments (HTAs) to secure faster termination of less commercially viable medicines, and an increasing number of collaborations between competing companies and organizations. This trend also relates to the observation that more pharma companies are in-licensing drug candidates as opposed to filling their pipelines with self-originated medicines, as in-licensed medicines, according to the study, often show higher rates of success.

While the length of studies hasn’t changed since the beginning of the 2000s, the study pointed out that phase II and III time spans are becoming more similar. Suggestions by the OHE for shorter development times included focusing more on earlier phases to eliminate wasted time and money on therapies that don’t work (so these therapies don’t move into more expensive trial areas), and an overall increased flexibility in R&D management and organization.

‘Continue to experiment’ is the key “envelope message” from the OHE to the industry.