There's a recent article in Nature Reviews Drug Discovery that has some alarming figures in it. This is yet another look at the industry from McKinsey, and we'll get to their McKinseyish solutions in a moment. But first, some numbers:
They calculate that the return on investment (ROI) from small-molecule drug research was nearly 12% during the late 1990s, but since 2001 it's been more like 7.5%. If true, that's not a very nice number at all, because their data indicate that most companies assume a capitalization rate of between 8.5 and 11% - in other words, internal industry estimates of what it costs to develop a drug over time now run higher, on average, than the actual returns from developing one.
Another alarming bit of news is their analysis of Phase III failures. From 1990 to 2007 there were 106 of those nasty, expensive events. But the McKinsey figures are that 45% of those failures were due to insufficient efficacy versus placebo - which, in theory, is the sort of thing you're supposed to be rather more sure about by that point, what with having run Phase II trials for efficacy and all. (I'd like to know how many Phase III trials succeeded over that time period as well - what's the overall percentage of failure at that point?) Another 24% of the failures were due to insufficient efficacy versus the standard of care, which is at least a bit more understandable. But together, nearly 70% of all Phase III failures aren't due to tox, they're because the drugs just didn't work as well as their developers thought.
Back to those ROI figures, though. Either those numbers are wrong, or we're in quite a fix. (Of course, since the authors are consultants, their viewpoint is likely that those numbers are the best available, that all of us are indeed in a fix, and that if we pay them money they'll help us out of it). The paper does have some recommendations, to wit:
1. Cut costs, but not the obvious stuff that companies have been doing. Instead, they suggest broader strategies such as considering whether a company's clinical trials are consistently over-powered, and to not do quite as much "planning for success", since most development programs fail. That is, don't automatically gear up for a full overlapping development workup for every compound in the pipeline, but consider staging things so you won't waste as much effort if (or when) they crash out. And naturally, they also suggest outsourcing whatever "non-core" functions there are available.
2. Work faster. I have to say, though, that if I got paid every time I heard this one, I wouldn't have to work. The authors point out, correctly, that delays in getting a compound to market are indeed hideously costly, but on-the-other-hand it by saying that "Of course, gains in speed cannot come from short cuts: the key to capturing value from programme acceleration is choosing the right programmes to accelerate". And that leads into their third category, which is. . .
3. Make better decisions. This isn't quite a much of an eye-roller as it might seem, because this is where they bring in those Phase III numbers above. Such failures suggest some deeper problems:
"In our experience, many organizations still advance compounds for the wrong reasons: because of momentum, 'numbers-focused' incentive systems or through waiting too long to have tough conversations about the required level of product differentiation."
And I have to say, they have a point. People who've been in the industry for some years will have seen all of those mistakes made. for sure. But figuring how to stop those things from happening is the tough part, and presumably that's one of the things that McKinsey is selling.