How much do pharma companies spend on R&D?

There are obstacles at each stage of the development pipeline, and the costs of manufacturing innovative drugs and treatments continue to rise: global spending on pharmaceutical R&D increased by 6.5 percent in 2018. For many pharma companies, long-term growth depends on their ability to discover new products or identify new uses for older ones – doing so helps to offset revenue losses that occur when drugs lose market exclusivity. In the hope of finding the next blockbuster drug, the top pharmaceutical companies invest significant amounts into R&D projects.

The complexities of clinical studies

Research teams must meticulously plan what they want to achieve from each phase of a clinical study, and most trials contain multiple endpoints that are used to assess the drug’s potential benefits and side effects. The number of endpoints in a typical phase three protocol has increased over time; as a result, planning and testing have become more challenging, and this can lead to false conclusions. Due to the increased complexity of clinical trials, many pharmaceutical companies outsource operations to contract research organizations (CROs), which provide specialist support at particular phases of the drug development process. Driven by demand, the U.S. market for CROs has shown steady growth in recent years.

Drug developers seek approval

There were approximately 6,200 drugs in the three clinical phases of the global R&D pipeline as of early 2020. The number of drugs in phases two and three varies significantly, which suggests that the transition from one to the other is particularly difficult. For new drugs in the United States, the probability of phase two success is less than 50 percent in almost every disease area. Before new treatments can be sold in the U.S., the Center for Drug Evaluation and Research (CDER) must review all applications. Nearly 50 novel products were approved by CDER in 2019, meaning the benefits to patients outweigh the known risks.

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