The cost of developing new medicines has shot up while the number of drugs in late-stage development has declined further, underlining the challenges faced by the major pharmaceutical companies.
A report by Deloitte on the world's 12 largest drugmakers shows that the average cost of bringing a product to market rose by more than 25% to more than $1bn (£630m) this year, from $830m in 2010. The number of late-stage drugs in development dropped to 18 from 23, on average, per company. Ten of the 12 firms have seen a decline in returns from research and development (R&D), resulting in an overall drop to 8.4% from 11.8% last year.
This month, a new antidepressant drug by AstraZeneca – seen as the most likely successor to Seroquel, the firm's second-biggest selling drug – failed its first late-stage trial. GlaxoSmithKline suffered a setback in March when an experimental type-1 diabetics drug failed a late-stage clinical trial, following the failure of a similar medicine from its US rival Eli Lilly last year.
GSK's chief executive, Andrew Witty, said recently that the high cost of drug discovery was "unacceptable" and urged the industry "to fail less often".
Julian Remnant, head of Deloitte's European R&D advisory practice, said: "While this picture reflects a snapshot of the very real productivity challenges the industry is facing, it belies some underlying successes. Of the 12 companies we analyse each year – the top 12 research-based pharmaceutical companies globally – nearly two-thirds succeeded in realising more value from product commercialisation than has been lost from late-stage product failures.
"Also, across the 12 companies, non-R&D costs have declined, resulting in a higher operating margin – which helps to free up cash flow that could be reinvested in R&D," he said.
But some companies, such as Pfizer, the world's largest drugmaker, have decided to plough less money into R&D and buy in more drugs from biotech firms and universities. Last year spending on R&D by the industry fell for the first time.
Remnant called for more collaboration between companies. "The walls of secrecy are coming down in some cases and there are increasing numbers of players within the industry forming alliances and joint ventures to pool research knowledge, in particular disease area or indication.
"Having said this, the pharmaceutical R&D sector can do more to work together, for example, sharing knowledge on the science behind failed molecules and studies will help improve success rates, and ultimately bring down the cost to develop new medicines."
Remnant also believes companies will come together to simplify and share non-competitive areas of the R&D operation to reduce cost.
Some drugmakers have also spent millions on settlements. Last week, the Sandoz division of Swiss group Novartis agreed to pay $150m to settle lawsuits filed by Florida, California and a whistleblower, to settle pricing fraud charges. GSK recently agreed to pay $3bn to settle investigations by American authorities into the sale and marketing of drugs such as Avandia and Wellbutrin.
By Julia Kollewe