Growing the pipeline, growing the bottom line — shifts in pharmaceutical R&D innovation

By Chris Stirling

As spending on pharmaceutical research and development (R&D) continues to soar, executives, shareholders and analysts alike are entitled to ask: what value are we getting for our investment?

The pharma sector invests more money in research than any other industry, with five of the world’s 10 highest R&D budgets belonging to drug companies. Between 2004 and 2013, the total industry expenditure on R&D rose from $88bn (£52bn) to $135bn, and is forecast to reach $149bn by 2018.

Yet in the same time period, the estimated cost of bringing a new chemical or biological product to market has more than trebled from $451m to $1.5bn. Meanwhile, the average number of annual US Food and Drug Administration (FDA) approvals for new molecular entities (NMEs) — a good directional indicator of innovation — fell from 31.5 in 1990 to an average of just 22.9 from 2001–10…

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