R&D is the heart of the Pharmaceutical Industry

R&D can be defined as any creative work undertaken on a systematic basis to increase the stock of knowledge, including the search for a new molecule, synthesis and modification of known molecules, or any method to increase production rate by adopting different techniques.

R&D is essential for a pharma-company to survive in the market. Every year, billions of dollars are spent on it in the US and Europe. The Indian pharmaceutical companies, on the other hand, have been criticised for their low level of investment in R&D, both in India and other parts of the world. It is reported that most Indian companies spend only a fraction of their sales, less than 1%, on R&D. As a result, India, although well educated scientifically and technologically advanced, has often been viewed as a third-world country that stumbles along by copying western products aided by lax patent policies.

What drives the pharmaceutical R&D: profitability or spending?

Profitability and investments in R&D can be linked in three rather different ways:

1)   Successful R&D leads to new products, which, depending on their reception in the market, can add greatly to company profits.

2)   The profits earned by a company serve as the source of funds to support R&D investments, and these R&D funds can also be raised through new capital issues.

3)   Managers’ expectations of future profit opportunities, which are tempered by market conditions, can impose a push-pull influence on R&D investments. 

Testing how well these relationships hold for investments in pharmaceutical R&D is made difficult by the complex structure of the leading pharmaceutical companies.

How does R&D drive the basic science knowledge to drug oriented knowledge?

In the pharmaceutical industry, a typical R&D process can last up to 12 years; only one of 10,000 substances are reported to become a marketable product. In addition, markets for pharmaceutical products tend to become more fragmented, leading to an increased risk of market failure. At the same time, the number of new drug approvals is rapidly declining, while R&D expenditures are escalating as a result of high investments in new drug discovery technologies and more complex and expensive clinical studies. As a response, pharmaceutical firms have started to focus on balancing the right size and structure of their R&D activities. This leads to several organizational trends: (1) novel management of technologies; (2) R&D internationalisation and (3) open innovation modes.

However, while pharmaceutical R&D has been facing intense criticism because of declining productivity, the overall industry is looking forward to an exciting future. 

The following strategies are major elements towards successful pharmaceutical R&D:

1)   new technologies (eg highthroughput screening, bioinformatics, or molecular drug design) in the drug discovery process, which will revolutionise the way pharmaceutical companies manage innovation;

2)   improved clinical trial designs, which will speed approval and signal a shift from broadly targeted drugs to more focused medicines with much higher therapeutic value for the target population;

3)   introduction of new market strategies (eg whether the traditional blockbuster concept is still applicable for the future); and

4)   improved R&D pipeline management, with balanced globalization and collaboration strategy.