The Virtual R&D Model 2012 and Beyond
On average, it now takes pharmaceutical companies ten years and $1 billion (£0.6 billion) to develop just one drug.
In a bid to cut these costs, companies are increasingly turning to third-party collaborations, which is now being recognised as the new watch phrase when it comes to outsourcing.
These collaborations are spawning an increasingly popular field of research and development; virtual R&D.
According to the Pharma 2020: Virtual R&D - Which Path Will You Take? report from PwC, virtual R&D has the potential to reduce the R&D process by two-thirds, cut clinical trial costs and improve success rates.
The number of drugs in the pipeline that fail before they make it to market are on the up, and with the patent cliff threatening to slash revenues costs must be reduced. Indeed, just 11 per cent of promising molecules reach the market.
According to the PwC report, just four in ten pharmaceutical companies have enough drugs within their pipeline to make up for this loss in revenue.
Virtual R&D improves the certainty that drugs invested in will eventually make it to market, allowing pharmaceutical companies to reap back with investment on R&D.
However, the move to virtual R&D will result in what PwC describes as a more "challenging and demanding landscape" in which third-party collaborative efforts on R&D will emerge as the norm.
Companies will be faced with questions about what they keep in house and what they essentially outsource – a number in the industry now see the definition of outsourcing expanding to include partnerships and collaborative efforts.
Endo Pharmaceuticals is one company which has already expanded into virtual R&D, implementing its new capabilities in early and late stages of the drug development process, in an attempt to combine strong quality and oversight with international expertise.
Speaking to MedHealthWorld, Ivan Gergel, M.D. the executive vice president for research and development at Endo Pharmaceuticals, said their virtual R&D team now includes in-house experts in the United States and partners in India with specific capabilities who work together toward research goals.
"Endo has biochemists and other scientists working in our U.S. location, but we use research labs in India and have up to 80 people working there full time under contract, plus dozens more providing support services in their labs. This model saves us development time as well as significant capital costs – it would cost almost four times as much to operate an equivalent R&D program entirely in the US," he explained.
Commenting on the advantages of the company's current system, he added: "Not only does this increase our chances of achieving commercialization of new drug treatments, it gives us the option of shutting down programs that are not able to advance to the next level, and quickly shifting resources to accelerating the programs that are demonstrating the most promising results."
Recent research from HfS Research, co-authored by Value Notes, outlined a major shift in the outsourcing of research and development through third party collaborations, not just for R&D, but increasingly sales and marketing and process reengineering.
The benefits of this are now moving beyond cost-cutting, and allow pharmaceutical companies to boost productivity, while still retaining an in-house expertise. India, South Korea, China and the Philippines have all emerged as major basis for outsourcing thanks to their pharmaceutical expertise.
With more companies set to feel the effects of the patent cliff, and the lure of cost cutting proving attractive to even those who are not, virtual R&D appears to have a strong future ahead.
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