The future of R&D innovation

Alexander Gray and Mike Rea from IDEA Pharma explain why the current pharma R&D model is broken, and how it’s hindering commercialisation for companies across the industry

What do we mean by ‘innovation’? The question of how to define and measure productivity in pharma is one that remains open. There have been a number of incredibly exciting drug approvals over the last year, but the expected sales of these drugs are at their lowest, on average, in recent history. So, if we simply take approvals, or new indications for old drugs, we’re missing the definition of innovation, as distinct from invention – innovation is the realisation of value from invention.

Data from IDEA Pharma’s Pharmaceutical Innovation Index show that if you take the industry’s average R&D spend over the last five years and divide by the number of approvals by the top 30 pharma companies, the average cost per approval is around $6 billion, with some companies exceeding this by a significant margin.

The market has changed substantially in the last 20 years. Once, the philosophy was that if you achieved launch, the world would pay for it, but the market is now much, much more intensive in terms of competition. The industry was initially slow to react to this, but is making up lost ground fast.

• Read the full article in pharmaphorum's Deep Dive digital magazine here