CROs Stand to Benefit from Dramatic Rises in Pharma R&D Spending
Posted by: Faiz Kermani
A problem for the major pharma companies is that investors have become accustomed to double-digit growth performance and thus there is constant pressure on them to develop an ever-greater number of new products with high sales potential. However, the rising costs and risks of drug development combined with the lengthy drug development timescales and increasing competition have made it difficult for companies to keep pace with such expectations. Clinical trials are a particularly costly and time-consuming part of the R&D process, frequently accounting for over 40% of total R&D spending (1).
Recent figures show that pharma companies are increasing their R&D investment in their quest to improve productivity. Figures from Pharmbiosys reveal that this rise in spending is particularly evident among the top ten pharma companies - who dominate the industry’s R&D efforts. According to the analyses, by the end of 2006, the top ten companies will be investing a massive $54 billion, representing close to 60% of total industry R&D spend (1). By 2008, their investment could rise to $65 billion, representing over 80% of total industry R&D spend (1).
Although smaller companies may produce innovative compounds, only the largest companies would appear to have the spending power to take these products through the necessary stages of clinical trials. The divide in spending power between these two sets of companies will be further increased by events such as mergers and acquisitions (1). Despite the vast investment at their disposal, the largest companies have become much more cost conscious when planning projects and using internal resources. As a result, it could be CROs that stand best to benefit from the rises being seen in R&D spending by these pharma industry leaders. Formalized plans to use contractors for clinical trials are increasingly becoming part of a company’s R&D strategy.
A 2006 report by the Tufts Center for the Study of Drug Development revealed that company sponsors who were more extensive users of CROs tended to complete their projects faster, with this being particularly noticeable during the study close-out period (2). An important additional feature of these findings was that quality comparable to submissions involving minimal use of CROs was maintained (2). Such findings will give confidence to those wishing to outsource projects and counter fears about loss of control over the development of products.
Increasing R&D spending will enable the largest companies to expand their pipelines, but outsourcing will allow them to benefit even more from the additional investment. Moreover, the greater use of outsourcing will mean that CROs will be viewed less as simple ‘service providers’ and more as recognized partners in drug development by those who work with them. Such cooperation can only improve industry efforts to develop new and innovative drugs to satisfy unmet medical need.
- Pharmaceutical Research and Development in the 21st Century. http://www.pharmbiosys.com/
- Anon (2006). CROs Usage Associated With Faster Drug Development Speed At Comparable Quality, According To Tufts Center For The Study Of Drug Development. Medical News Today. http://www.medicalnewstoday.com/medicalnews.php?newsid=36506
Faiz Kermani PhD is an independent consultant with several publications in the areas of pharmaceutical R&D, pricing and reimbursement, marketing and medical education. He can be contacted via firstname.lastname@example.org