The evaluation of system-wide financial incentives in pipeline decisions in the pharmaceutical and biotechnology industry : the paradox of R&D spend Vs. new drug approvals

For several decades, the ascendancy of the Pharma & Biotech sector was largely driven by favorable macro-economic conditions combined with an astonishing level of innovation and a clear focus on addressing unmet medical needs. Significant R&D investments led to innovative drugs that changed clinical practice across multiple illnesses and contributed to an overall rise in life expectancy around the world. Unfortunately, this trend has not continued. Since the mid-90s', the approval of novel drugs has plummeted despite record levels of R&D investment. It is estimated that between 2000 and 2010, the top 10 global Pharma and Biotech companies have collectively invested over $500 Billion in R&D. In the same period, only about 150 novel drugs entered the market. This is partly explained by the fact that quick-wins have been harvested, and that further progress in treating grievous illness is harder to achieve. This is compounded by increasing concerns about the longterm safety of drugs and the conservative regulatory climate that has prevailed since 2000. In this challenging regulatory and cost environment, the basic economic model of the industry is now being questioned. In this work I review the recent financial performance of ten major global pharmaceutical companies, and the challenges faced by the industry in moving from a deterministic, blockbuster era to a more stochastic era defined by multiple unknowns.

Department dc:contributor.department

Sloan School of Management.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2012

Author dc:creator

• Swarna, Kailash, 1963-

Advisor dc:contributor.advisor

• Andrew Lo and John Van Maanen.

• Sloan School of Management.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/72888

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/72888