Research and development (R&D) in the pharma industry is advancing in leaps and bounds. The pharmaceutical R&D expenditure in the United States has grown from $2 million in 1980 to $71.4 million in 2017. New drug approvals were at an all-time high in 2018.
Because it is connected to the dynamic healthcare industry, the interest in pharma R&D is never going to slow down.
Many pharma giants, including Roche, Novartis, and Pfizer, have marginally reduced their R&D expenditures, whereas several smaller firms have increased their R&D activities. Deloitte’s annual report on measuring returns from pharma innovation says that the top 12 pharma companies had the lowest returns in nine years, whereas smaller firms outperformed them.
This slowdown among pharma giants could mean that either they are planning to innovate more, using advanced technologies or by shifting their focus towards other areas.
Most global pharma companies are repositioning themselves by reducing employees, refocusing R&D, closing manufacturing plants, and divesting underperforming businesses. They are re-stocking pipelines with promising new drug candidates. Although driven by economic factors, this restructuring shows a renewed commitment to innovate and collaborate for patients’ benefit.
As part of restructuring, pharma companies are making portfolio shifts towards rare disease R&D. They prefer focusing their R&D efforts on areas that need major breakthroughs.
Common problems, such as diabetes, hypertension, depression, and arthritis, already have excellent medicines. The opportunity of finding therapies better than them may be unlikely. Besides, creating successful medicines for common illnesses can be expensive and time-consuming. Clinical trials for therapies for rare diseases are relatively small and cost less.
Pharma companies prefer to create new life-changing, curative medicines that bring high returns. A recent report showed that the clinical success for rare disease medicines is much higher than for general medicines. Moreover, there are fewer competitors in such areas.
Patient advocacy groups would help spread awareness, ensuring enough participation in clinical trials. Since such medicines are meant for people with severe disorders, for which there are almost no other treatment options, regulatory agencies are more lenient towards them.
Pharmaceutical companies are outsourcing research activities to academic centers and contract research organizations (CROs) to stay competitive. They outsource many activities, ranging from basic research to late-stage development. R&D outsourcing is predicted to grow to $4.44 billion by 2025.
According to Pharmaceutical Researchers and Manufacturers of America (PhRMA), an estimated $0.8 to $1.7 billion was spent in pharma R&D to bring a new drug to market, making it a rather expensive venture. So, it is cheaper and more efficient to outsource drug discovery than it is to do so in-house.
Most pharma companies are adopting AI and such other technologies. AI evaluates potential drug candidates much faster than humans. It helps create disease-fighting 3D models and run clinical trials much better than before.
It also makes drug discovery less expensive by almost 70 percent. In short, AI’s predictive and analytic powers make R&D smarter, faster, and more strategic. Cloud computing also increases efficiency, cost-savings and competitive advantages, without affecting security or compliance.
The concept of value-based healthcare has made pharma R&D focus on patients’ feedback about existing treatments. Companies strive to avoid known causes of treatment discontinuation and to enhance the quality of their drugs. They run clinical trials to check if all these efforts improve patient outcomes and provide benefits.
However, pharmaceutical companies may not be able to handle these tasks alone. Some of them are making contract development and manufacturing organizations (CDMOs) their collaborative partners. Usually CDMOs have a broader range of experience and expertise in technologies and tools. They are reliable and provide high-quality service. They can formulate and launch new drugs that deliver safe and effective treatments to patients.
All segments of the pharmaceutical industry will continue to see consolidation, such as the high-profile acquisitions of Celgene by BMS and Loxo by Eli Lilly at the beginning of 2019. This will be necessary for pharma companies to secure a R&D foothold in the specialty and rare disease areas. It will also help them prevent price erosion and add new products in the generic drugs segment.
Pharma companies are trying hard to increase productivity and innovate in many ways, including collaborating with the rest of the industry and adopting new technologies. They are also rethinking their business models to revitalize their R&D efforts.
Large pharma companies acquire smaller companies because they are better at drug discovery. Some large companies, such as Johnson & Johnson (J&J), believe in not only acquisitions but also a series of channels to improve their R&D. J&J has JLABS biotech incubators and Innovation Centers worldwide. It is also involved in corporate venture investments and partnerships.
Companies, such as 150-year-old Bayer, build separate companies around innovative research, such as cell-based therapies and gene editing. They do so lest these new technologies disrupt their internal R&D model. The idea is for each of these companies to be the best in their category, and more importantly, maintain exclusive intellectual property.
By turning into data curators, some companies, such as Roche, are changing their R&D. They gather and analyze large volumes of data to develop and deliver innovative therapies. They combine real-world data with very specific patient data to create a much clearer picture about illnesses. This helps uncover a lot of hitherto unknown information.
To capitalize on the advantages of digital revolution, many pharmaceutical companies, such as Novartis, digitalize their R&D operations. They achieve superior efficiency, consistency, and transparency by doing so. Digitalization is also disruptive as it challenges mindsets, methods and processes. However, it boosts R&D productivity.
Regardless of the approaches different pharmaceutical companies adopt, they are all striving for agility and improvement by transforming R&D. However, they face the following challenges:
Myriad complications: Apart from being research-intensive, pharma R&D also has to contend with high investment, longer waits for tangible outcomes, and failure factors beyond its control.
Risk-averse mindsets: R&D employees work in rigid and sequential ways, which can make moving to an agile model difficult.
Intense competition: In rapidly advancing research areas, the race to discovery may be tough, with competitors catching up fast.
Multiple customers: Pharma businesses have multiple stakeholders—regulators, providers, payers, and patients. Serving all of them, across an array of products, can be quite arduous.
Rising costs: Many drugs fail at clinical trials. Of the 12 percent of drugs that make it to the market, very few make meaningful profits. Regardless of their expertise and experience, R&D cannot predict the outcome of clinical trials. Nor can they help the high clinical costs.
Patient-centric healthcare: The demand for personalized medicine and therapies that combine smart devices is growing exponentially. People are now scrutinizing healthcare costs, efficacy, and safety. Clinical trials have to demonstrate a meaningful impact in patient lives.
All such challenges can be overcome by keeping the goals of clinical trial efficiency, return on investment, and meeting patient needs central to R&D efforts. Although market growth has slowed down in 2019, the pharmaceutical industry is still going strong. It is sure to become agile and robust because of further drug discovery and drug approvals, aided by new models and technologies.
My name is Jason and I’ve been writing for online and offline publications for the most part of my writing career. I love writing about technology and business. Anything else is fine too unless it doesn’t skip me completely. Social media is not my cup of tea, but I find online messaging services extremely handy. My pastimes include reading books and magazines, and also watching movies and sports with my favorite people.