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Changing R&D models in research-based pharmaceutical companies.

ABSTRACT: New drugs serving unmet medical needs are one of the key value drivers of research-based pharmaceutical companies. The efficiency of research and development (R&D), defined as the successful approval and launch of new medicines (output) in the rate of the monetary investments required for R&D (input), has declined since decades. We aimed to identify, analyze and describe the factors that impact the R&D efficiency. Based on publicly available information, we reviewed the R&D models of major research-based pharmaceutical companies and analyzed the key challenges and success factors of a sustainable R&D output. We calculated that the R&D efficiencies of major research-based pharmaceutical companies were in the range of USD 3.2-32.3 billion (2006-2014). As these numbers challenge the model of an innovation-driven pharmaceutical industry, we analyzed the concepts that companies are following to increase their R&D efficiencies: (A) Activities to reduce portfolio and project risk, (B) activities to reduce R&D costs, and (C) activities to increase the innovation potential. While category A comprises measures such as portfolio management and licensing, measures grouped in category B are outsourcing and risk-sharing in late-stage development. Companies made diverse steps to increase their innovation potential and open innovation, exemplified by open source, innovation centers, or crowdsourcing, plays a key role in doing so. In conclusion, research-based pharmaceutical companies need to be aware of the key factors, which impact the rate of innovation, R&D cost and probability of success. Depending on their company strategy and their R&D set-up they can opt for one of the following open innovators: knowledge creator, knowledge integrator or knowledge leverager.

SUBMITTER: Schuhmacher A

PROVIDER: S-EPMC4847363 | biostudies-other | 2016 Apr

REPOSITORIES: biostudies-other

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Changing R&D models in research-based pharmaceutical companies.

Schuhmacher Alexander A Gassmann Oliver O Hinder Markus M

Journal of translational medicine 20160427 1

New drugs serving unmet medical needs are one of the key value drivers of research-based pharmaceutical companies. The efficiency of research and development (R&D), defined as the successful approval and launch of new medicines (output) in the rate of the monetary investments required for R&D (input), has declined since decades. We aimed to identify, analyze and describe the factors that impact the R&D efficiency. Based on publicly available information, we reviewed the R&D models of major resea ...[more]

PMID: 27118048

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Project description:Importance:Understanding the profitability of pharmaceutical companies is essential to formulating evidence-based policies to reduce drug costs while maintaining the industry's ability to innovate and provide essential medicines. Objective:To compare the profitability of large pharmaceutical companies with other large companies. Design, Setting, and Participants:This cross-sectional study compared the annual profits of 35 large pharmaceutical companies with 357 companies in the S&P 500 Index from 2000 to 2018 using information from annual financial reports. A statistically significant differential profit margin favoring pharmaceutical companies was evidence of greater profitability. Exposures:Large pharmaceutical vs nonpharmaceutical companies. Main Outcomes and Measures:The main outcomes were revenue and 3 measures of annual profit: gross profit (revenue minus the cost of goods sold); earnings before interest, taxes, depreciation, and amortization (EBITDA; pretax profit from core business activities); and net income, also referred to as earnings (difference between all revenues and expenses). Profit measures are described as cumulative for all companies from 2000 to 2018 or annual profit as a fraction of revenue (margin). Results:From 2000 to 2018, 35 large pharmaceutical companies reported cumulative revenue of $11.5 trillion, gross profit of $8.6 trillion, EBITDA of $3.7 trillion, and net income of $1.9 trillion, while 357 S&P 500 companies reported cumulative revenue of $130.5 trillion, gross profit of $42.1 trillion, EBITDA of $22.8 trillion, and net income of $9.4 trillion. In bivariable regression models, the median annual profit margins of pharmaceutical companies were significantly greater than those of S&P 500 companies (gross profit margin: 76.5% vs 37.4%; difference, 39.1% [95% CI, 32.5%-45.7%]; P?<?.001; EBITDA margin: 29.4% vs 19%; difference, 10.4% [95% CI, 7.1%-13.7%]; P?<?.001; net income margin: 13.8% vs 7.7%; difference, 6.1% [95% CI, 2.5%-9.7%]; P?<?.001). The differences were smaller in regression models controlling for company size and year and when considering only companies reporting research and development expense (gross profit margin: difference, 30.5% [95% CI, 20.9%-40.1%]; P?<?.001; EBITDA margin: difference, 9.2% [95% CI, 5.2%-13.2%]; P?<?.001; net income margin: difference, 3.6% [95% CI, 0.011%-7.2%]; P?=?.05). Conclusions and Relevance:From 2000 to 2018, the profitability of large pharmaceutical companies was significantly greater than other large, public companies, but the difference was less pronounced when considering company size, year, or research and development expense. Data on the profitability of large pharmaceutical companies may be relevant to formulating evidence-based policies to make medicines more affordable.

Project description:BackgroundOncologists who author clinical practice guidelines frequently have financial relationships with the pharmaceutical industry. It is unknown whether participation on clinical practice guideline committees is associated with differences in the amounts of industry money received.Materials and methodsWe conducted a nested case-control study from August 2013 to December 2018. We manually abstracted membership records of National Comprehensive Cancer Network (NCCN) Guidelines committees for the 20 most common cancers and linked to Open Payments. The study sample included medical oncologists selected to join an NCCN Guidelines committee ("joiners") during the study period. Joiners were matched 1:2 to medical oncologists who had no participation on NCCN committees (controls) by gender, NCCN institution, and medical school graduation year. We performed difference-in-differences (DiD) estimation to assess whether selection to an NCCN committee was associated with the dollar value of payments received from industry, using generalized estimating equations to address correlation between matched pairs and between repeated observations of the same pair.ResultsDuring the study period, 54 physicians joined an NCCN Guidelines committee. These physicians received more payments than matched controls in the year prior to joining ($11,259 vs. $3,427; p = .02); this difference did not increase in the year after joining (DiD = $731; p = .45).ConclusionMedical oncologists selected to NCCN Guidelines committees had greater financial ties to industry than their peers. The potential influence of industry in oncology clinical practice guidelines may be reduced through the selection of committee members with fewer ties to industry.Implications for practiceOncologists who author clinical practice guidelines frequently have financial conflicts of interest with the pharmaceutical industry. This creates concern about the potential for industry influence on guidelines. However, it is unknown whether oncologists who author guidelines have greater industry relationships than their peers. This study compared medical oncologists who were newly selected to join a National Comprehensive Cancer Network (NCCN) Guidelines panel with medical oncologists at the same institutions and at similar career stages. At the time they joined, oncologists joining NCCN Guidelines panels had received more than three times the dollar value of industry payments than their peers. The potential for industry influence may be reduced by the selection of less-conflicted panel members.

Project description:IntroductionInteractions between pharmaceutical companies and healthcare providers are increasingly scrutinized by academics, professionals, media, and politicians. Most empirical studies and professional guidelines focus on unilateral donor-recipient types of interaction and overlook, or fail to distinguish between, more reciprocal types of interaction. However, the degree of goal alignment and potential for value creation differs in these two types of interactions. Failing to differentiate between these two forms of interaction between pharmaceutical companies and healthcare providers could thus lead to biased conclusions regarding their desirability. This study reviews the empirical literature regarding the effects of bilateral forms of interactions between pharmaceutical companies and healthcare providers in order to explore their effects.Material and methodsWe searched two medical databases (i.e. PubMed and Cochrane Library) and one business database (i.e. EBSCO) for empirical, peer-reviewed articles concerning any type of bilateral interaction between pharmaceutical companies and healthcare providers. We included quantitative articles which were written in English and published between January 1st, 2000 and October 31st, 2016, and where the title or abstract included a combination of synonyms of the following keywords: pharmaceutical companies, healthcare providers, interaction, and effects.ResultsOur search results yielded 10 studies which were included in our analysis. These studies focused on either research-oriented interaction or on education-oriented interaction. The included studies reported various outcomes of interaction such as prescribing behavior, ethical dilemmas, and research output. Regardless of the type of interaction, the studies either reported no significant effects or ambivalent outcomes such as affected clinical practice or ethical issues.Discussion and conclusionThe effects of bilateral interactions reported in the literature are similar to those reported in studies concerning unilateral interactions. The theoretical notion that bilateral interactions between pharmaceutical companies and healthcare providers have different effects given their increased level of goal alignment thus does not seem to hold. However, most of the empirical studies focus on intermediary, provider-level, outcomes such as altered prescribing behavior. Outcomes at the health system level such as overall costs and quality of care are overlooked. Further research is necessary in order to disentangle various forms of value created by different types of interactions between pharmaceutical companies and healthcare providers.

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Changing R&D models in research-based pharmaceutical companies.

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Changing R&D models in research-based pharmaceutical companies.

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