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Best-Sourcing in the Pharmaceutical Research Industry

Industry Background

The cost of developing prescription drugs has been steadily increasing over the last decade. According to a report published by the Tufts Center for the Study of Drug Development (CSDD), the cost of developing a prescription drug, that gains market approval, is $2.6 billion. This is a 145 % increase, correcting for inflation, over the estimate the center made in 2003 and includes an average $1.43 billion in out-of-pocket expenses (DiMasi, Grabowski, & Hansen, 2016). More than 60 % of the “out of pocket” costs of drug discovery are in the clinical trial phase, given that only 1 in 10 drugs that reach the clinical trial process receive approval. The high cost of drug discovery is driven by the time and cost of drug trials, increased regulatory requirements for drug approvals, and lower proportion of drugs getting approved at the end of the process. The typical lifecycle of a drug discovery process is illustrated in Fig. 7.4.

A clinical trial is a systematic study of new drugs in human subjects to generate data for discovering and verifying the efficacy and safety of a new drug. Clinical trials are highly regulated processes and can take place over a period of 5-10 years. The trials are spread across three phases prior to FDA approval with each phase having an increased patient sample size. The fourth phase is post launch and is to monitor safety of the drug on an ongoing basis.

Drug discovery and development process

Fig. 7.4 Drug discovery and development process

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