2016 sees significant drop in R&D returns for drug companies

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2014 and 2015 saw the launch of 41 and 45 new drug products respectively, yet 2016 had only 19 by mid-December. This rapid deterioration in approvals is the lowest since 2010 and represents a dwindling return on profitability for drugmakers’ research. Compounding pressures include rising costs and concern about the high price of many modern medicines.

An annual report by Deloitte found return on investment in R&D to be down to 3.7% for the top 12 pharmaceutical companies. As it takes 14 years to develop and launch a drug, this raises questions about returns on innovation.

Analysts at Deutsche Bank have predicted a final tally of 22 FDA approvals for 2016, including the multiple sclerosis drug, Ocrevus, from Roche, and anticipate a rebound for 2017. Their more upbeat forecast takes into account some products in the pipeline for development that were delayed this year. These include sarilumab for rheumatoid arthritis, from Sanofi and Regeneron.

Although there has undoubtedly been a drop since the peak approval rates of 2014/15, industry executives point to the greater understanding of the genetic base of many diseases and expect to see new treatments developed for niche patient groups, such as rare diseases and sub-groups of cancers. Deutsche Bank therefore predicts the potential for 37 new drugs in 2017, and this number could be increased if the FDA speed up their internal reforms on the approval process.

On the other side of the Atlantic, the European medicines Agency (EMA) approved 73 new medicines in 2016, again down from the 2015 figure of 93. The EMA list (unlike the FDA’s) includes generic drugs.

This six-year low in drug approvals for R&D pharmaceutical returns has seen most companies struggling to reach historical peak sales, says Colin Terry, of Deloitte’s life sciences division. Costs per product are high and sales projections are in decline. Other industry commentators have noted that with Deloitte’s research into the big 12 pharmaceutical companies, R&D spending is not paying off as it used to, although they continue to spend considerably more on marketing. A report in the BMJ found that companies were finding it more profitable to produce variations on versions of existing drugs.

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