The changing structure of the pharmaceutical industry: perceptions on entrepreneurship and openness
2011 (English)In: Entrepreneurship And Technological Change / [ed] Lucio Cassia, Tommaso Minola and Stefano Paleari, Edward Elgar Publishing, 2011, 73-94 p.Chapter in book (Refereed)
The cost for radical innovation in the pharmaceutical industry, that is the development of a completely new molecular entity (NME), was recently estimated to be in the range of US$800 million (DiMasi et aI., 2003) and for a novel biologic it was calculated to be more than US$1300 million (DiMasi and Grabowski, 2007). These cost estimates were based on conventional discovery and process development programs in the pharmaceutical industry up to the point of registration and marketing authorization of an NME. However, there are additional costs stretching beyond the development program relating to the regulatory requirements to perform post-approval studies after introduction into the market. Such regulatory costs may include obtaining marketing approval in a variety of countries, costs for extended indications for new formulations as well as new patents (Gamier, 2008). In earlier estimates provided (DiMasi et aI., 2003; DiMasi and Grabowski, 2007), the authors assumed an average success rate for an NME emerging from clinical trials to be 21.5 per cent. Recent research has adjusted this estimate downwards to 11.5 per cent and the initial cost estimates of drug development have been adjusted upwards to more than US$1700 million per new NME. If further adjustment is made for additional cost increases over time and inflation, the true cost per NME is probably in the range of US$4000 million (Munos, 2009).
However, it still remains a complex issue to accurately estimate the costs of NMEs since research and development (R&D) expenses are typically invested over decades and should be depreciated over a longer period. In real life the true duration of this life cycle cost is highly variable and has probably increased over time. Experts are not able to agree how to evaluate capitalization and depreciation of drug R&D for large pharmaceutical companies (Big Pharma). Therefore, providing simple and accurate cost estimates of NME development in Big Pharma is likely to remain a major difficulty. The ability to predict success for an NME and calculate return on investment is further complicated by the nature of the drug discovery R&D model which has recently been under extensive review and question.
Place, publisher, year, edition, pages
Edward Elgar Publishing, 2011. 73-94 p.
Engineering and Technology
IdentifiersURN: urn:nbn:se:liu:diva-74776ISBN: 978-1-84980-747-0 (print)ISBN: 978-1-78100-201-8 (ebook)OAI: oai:DiVA.org:liu-74776DiVA: diva2:492540