Emerging economies could play a bigger role in developing lifesaving drugs as big pharmaceutical companies look to offset regulatory pressure and the high cost of research, development and manufacturing, by moving production to developing countries.
In a new report by Deloitte entitled Balancing the R&D Equation: Measuring the return from pharmaceutical innovation 2016, annual returns from investment in research of development among big pharma companies were found to have fallen from 10.1 percent in 2010 to 3.7 percent in 2016, while peak sales per product dropped 11.4 percent year-on-year during the same period. Smaller pharmaceutical firms performed better however, generating returns up to three times greater than their larger counterparts.
“We see companies continuing to review where they will run their phase II and III studies [based on the] availability of patient populations as well as some other national issues, such as ease of doing business, technology, ethics, approvals, and the complexity of logistics,” Colin Terry, a director in the life sciences department at Deloitte, told Development Finance.
Manufacturers such as Allergan and Novo Nordisk recently committed to limiting price hikes on medicines to below 10 percent, with the latter also agreeing to deliver fixed-price insulin to refugees and LDCs. However, research from the University of Melbourne and University of Michigan shows that the price of insulin has risen around 200 percent in the last decade.
Terry added: “The area [of drug development in developing countries] continues to be dynamic, but is a potential area for cost reduction for some companies as they balance potentially increased risks with a lower cost, and we expect innovation to grow ‘beyond Boston and San Francisco’ – emerging markets definitely have a role to play.”
The Deloitte report shows the cost of producing a new drug has risen to US$1.5 billion in 2016 from US$1.2 billion in 2010.
Another underlying challenge highlighted in the report is the productivity costs associated with longer lead times required to produce drugs and vaccines. In 2016, a yellow fever vaccine shortage forced medical professionals to have to dilute vials five-fold to prevent a pandemic.
With more than 1.3 billion people still lacking access to basic healthcare, Terry said that costs per product remain high while sales projections are expected to decline.
“Given it now takes the industry over 14 years to launch a drug, real questions should be raised about productivity and returns on innovation,” he concluded.