NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, December 14, 2016

The global pharmaceuticals industry is set to win the lowest annual number of new drug approvals this year since 2010 and a new report on Tuesday suggests drugmakers’ returns on research investment are deteriorating.

Only 19 new drugs have been approved in the key U.S. market so far in 2016 and, with less than three weeks to go, it is clear the full-year tally will be well down on 2015 and 2014’s bumper haul of 45 and 41 new products respectively.

At the same time the profitability of drug research is being squeezed by steadily rising costs and increasing political pressure over the high prices of many modern medicines. As a result projected returns on investment in research and development (R&D) for the top 12 pharmaceutical companies have fallen to just 3.7 percent this year from a high of 10.1 percent in 2010, according to consultancy Deloitte.

“The majority of companies are struggling to achieve historical peak sales,” said Colin Terry, a director in Deloitte’s life sciences practice. “As costs per product remain high, sales projections decline, and given it now takes the industry over 14 years to launch a drug, real questions should be raised about productivity and returns on innovation.”