New report shows the cost to bring a drug to market has decreased to under $2B

Insights from a comprehensive Clarivate report shows there are two main factors in the pharmaceutical industry that are causing the increase in drug approvals and subsequently the decrease in cost per new molecular entity (NME).

The first is an increased focus on rare diseases. Of the 57 NMEs launched in 2018, 22 had an orphan drug designation, indicating that they targeted a rare disease.

The second contributing factor is increased activity from smaller pharmaceutical companies. In 2018, 74% of drug launches were developed by companies with an R&D spend of $700 million to $2 billion, which is almost double the contribution this group made in 2009. Major pharma companies (R&D spend of greater than $2 billion) accounted for just 26% of drug launches.

The report reveals that while the number of drug approvals is up, the estimated sales per approval is on the decline. The average peak sales per asset almost halved between 2015 and 2018. This indicates older and legacy products continue to make up the vast majority of global sales, accounting for more than 85% worldwide. Additionally, these new drug approvals continue to target smaller patient populations. Between 2010 and 2018, the number of addressable patients per drug approval decreased by 15%.

The report also provides insights into pharmaceutical companies’ investment strategies, where external innovation plays a key role. In the first half of 2019 alone, global spend for pharma M&A and licensing activities was nearly $140 billion. This outpaced projected 2019 R&D spend by more than 60%.

“It is extremely encouraging to see the increase in new drug approvals driven by smaller pharma companies. This suggests size is no longer a prerequisite to bring a drug to market and R&D programs are becoming more efficient,” said Mukhtar Ahmed, President, Science Group, Clarivate Analytics. “What is concerning, however, is that forecasted sales per approval are declining. Even though the overall volume of new approvals is healthy, this raises questions about long term sustainability, particularly for large pharma.”

He continued, “Given the cost and risk associated with the drug development process, it is essential for researchers and decision makers to have access to accurate, comprehensive information and historical insights. This allows R&D investments to be allocated to the most promising areas of discovery and development and enables companies to better accelerate innovation.”

The 2019 Centre for Medicines Research (CMR) International Pharmaceutical R&D Factbook report was developed by Clarivate Analytics

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