Research Activities and Costs

Important general information regarding research is included in this section, especially research activity by the number of molecules and therapeutic areas and costs by stage of research, company, and changes over time. Worldwide, pharmaceutical research has reached a cost of $67.9 billion (52% spent in the USA), of which clinical research was about $47 B. To put these statistics into perspective, all government R&D spending for clinical research in the USA was $26 B vs. $31 B by the industry in one report [22].

The basic goal of the research division for a new product is to try to create a novel compound with a competitive advantage over existing products, in regard to mechanism of action, site of action, efficacy, safety, dosing schedule, formulation, administration, or convenience of use by providers and patients (Fig. 1.12). The commonly held rule of thumb for a success rate in product development from research molecules to approved products is a story of very heavy attrition and follows: 5,000 compounds in research, to 500 in preclinical study, to 50 into Investigational New Drug applications (INDs) and early clinical research, to 5 into late-stage clinical research, and then only 1 product approved. The 2003 research activity is shown on Fig. 1.12; 10,000 new projects in the laboratory, 2,100 new candidates, 100 New Drug Applications (NDAs), and about 15-30 new molecular entities (NMEs). For the about 10,000 active INDs that existed in 2001, the figure gives us an idea of future areas for potential products, being led by CNS area, oncology second, and immunology with infectious disease (ID) third, followed by metabolism and r Research:

C WW Projects: 10,000 + in 2003 ^^ INDs: 2100 + /yr NDAs: 100 + /yr (>60% approved) NMES: 15-30/yr r INDs & Therapeutic Areas :

c CNS #1, Oncol #2, ID/Immun #3, Metab/Endocrin #4, Inflam/Analg #5, Viral #4, Radiolog #5, CV/Renal #6, Gl/Coag #7, Urol/Repro #8

r Biotech:

O 4400 companies (WW) in research

C over 300 products in clinical trials endocrinology fourth, inflammation and analgesia fifth, cardiovascular (CV)/renal ranked down to sixth, gastrointestinal (GI)/coagulation seventh, and urology/reproduction eighth. Biotechnology companies have become major drivers of research in collaboration with pharmaceutical companies; the 4,400 worldwide companies have thousands of research projects and from 300 to 600 products in clinical trials [22, 27-29].

Research (basic and clinical) costs are substantial and increasing in the pharmaceutical industry. About 18% of gross sales are invested in research and development, and it has grown by almost 100% in a short 5-year period from an industry total of $21 billion to about $40 billion in 2004 (Fig. 1.13). The number one provider of clinical research investment in the USA is the pharmaceutical industry, almost triple the National Institutes of Health (NIH) budget. Clinical spending rises as you proceed from phase 1 to 3, directly related to the size of the studies and their greater diagnostic and monitoring complexity. Also, an estimate of the growth in clinical research costs is about 10% per year. To give you another perspective on the costs for clinical research, a per patient fee is provided to an institution/investigator for conducting a clinical trial, and it was $6,716.00 per patient across the industry in 2002. On top of this university grant support, the cost of the company efforts per patient well exceeds this figure to pay for the work of its research staff, the clinical managers, study monitors, statisticians, data managers, regulators, auditors, and others. Most companies employ clinical research organizations (CROs) to perform a large percentage of this workload (in 2003, companies spent $10.4 B with CROs, about 30% of R&D budget). The total cost to develop a pharmaceutical product by the industry has been calculated to have risen to about $900 million per successful drug approval. This cost has risen by more than 200% over the past decade, related to increased regulatory hurdles, greater patient study sizes, more complex disease diagnostics and assessments, the cost of product failures, postmarketing research costs, and inflation in health care costs [4, 15, 21, 22, 30].

r Clinical Research budgets WW / U.S.: Q 1998 $39B / 21B; $ 47B / 33B in 2003 (18% of sales in U.S.)

r Grants: o Clinical grants: $10 Bin 2003 c All R&D: $31B (industry) vs $26B (government)

Spend for clinical phases: ($33B total in U.S.) o P.I - 11%; P.II - 22%, P.III - 48%, P.IV - 19% o Growth: >10% per year

Costs per patient: $6, 500 GI to $9, 800 oncology in 2003

r Drug development cost increases: p '92 - $259MM, / '96 - $499, ^ '99 - $635, P ^'01 - $800+, / '04 - $900+


1.12. Research Activity

Fig. 1.13. Research Activity & Costs

The total R&D spend by the top 10 drug companies in 2004 was $49.1 billion, led by Sanofi-Aventis at $9.31 B with over $2 B for the 10th company (Fig. 1.14). For the top 50 worldwide companies, R&D spend as percentage of total sales was 19.4%, ranging from 12.2% to 31.2% excluding the generic companies who primarily perform pharmacokinetic equivalence studies and few clinical trials. These top 10 companies equal about two-thirds of the total R&D spend of the industry. Biotech spending is rising as well, with the top 10 reaching over $5 B in 2004, which is dwarfed by the top pharma companies in dollars, but represents more than 25% of biotech company revenues. Amgen leads biotechnology segment by far in R&D investment, doubling the second company, Genentech [15, 17, 19, 21, 30].

Another look at research spending is across all the stages of R&D, as shown on Figure 1.15. In 2002, R&D spending also can be broken down into three general segments; non-clinical drug work at 21.4%, animal testing at 16.2%, and clinical trial costs at 35.9%. The nonclinical work is


% Spend


% Spend

Synthesis & Extraction

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