The lack of proper funding proves to be one of the most problematic issues in the medical industry. According to Frye et al. (2011), ADD centers lack adequate financial support as governments have set flat funding, which has resulted in intense competition among these institutions to acquire grants. For example, ADD centers get the most financial support (41%) from federal grants and contracts, which proves to be insufficient to their operations. What is more, only 14% of these establishments can maintain long-term working relations with for-profit agencies, while a majority greatly rely on client fees and income from commercial institutions to generate revenues (Frye et al., 2011).
Another financial problem in this sector arises from high drug development expenses (DiMasi et al., 2010). This challenge mainly occurs because of two fundamental factors, the first one is time, because as clinical trials increasingly become difficult, the ‘time costs’ of resource investments also rise, despite development times remaining stable. Secondly, development risk is another contributing aspect since high drug failure rates translate into significant Research and Development (R&D) costs, regardless of whether these expenses will increase or not (DiMasi et al., 2010).
Further, Collier (2009) notes that a majority of pharmaceutical companies point to costly clinical trials as the leading cause of these expenses. The drug development process is challenging to the medical sector because of the risks, time and costs it requires. An additional contributing factor of high development costs is the complex, lengthy and unstable R&D model that a majority of drug firms use (Cuatrecasas, 2006). These expenses arise because of mismanagement of the R&D framework. For instance, a majority of management departments in medical institutions only conduct the R&D process for profit reasons, without understanding the scientific complexities or objectives and consequently, limit creativity and innovation (Cuatrecasas, 2006).
Alternatively, according to Collier (2009), despite the fact that people have not come to an agreement about the actual development costs in the pharmaceutical industry, most experts acknowledge that these expenses are rising steadily. For example, on one hand, different research studies estimate the total drug development budget to range from $1.3 to $1.7 billion, while on the other, some scholars argue that such investigations only compete to come up with the largest figure (DiMasi, 2006; Collier, 2009). This debate arises because drug companies are the core sponsors of these studies, and thus, there is a possibility that the results will be in their favor (Collier, 2009).
Further, the pharmaceutical industry faces the challenge of relying on an unstable and unsustainable R&D model (Munos, 2009). This R&D framework has proved to be ineffective because, in spite of the different efforts that drug companies have made over the last half a century, their drug production rates have remained the same. For example, DiMasi (2006) posits that from 1963 to 2003, R&D spending has continued to rise, while pharmaceutical institutions have failed to create new drugs at the same rate with this increase. Additionally, costs per NME (New Molecular Entity) have risen over time, while efforts like mergers and acquisitions have created an insignificant effect on drug production (Munos, 2009). Alternatively, Cuatrecasas (2006) notes that the pharmaceutical sector is facing the problem of insufficient productivity because the R&D model inhibits innovation while encouraging less important activities such as focusing on blockbuster drugs, fast sales growth and so forth. Therefore, the R&D model in the pharmaceutical sector is struggling to meet the industry objectives as sales are becoming stagnant, while costs and competition increase and as a result, it is causing substantial problems within the drug manufacturing sector.
An additional critical issue facing the pharmaceutical industry is the lack of proper skills or expertise. For instance, Frye et al. (2011) note that some of the major challenges inhibiting the operation of ADD (Academic Drug Discovery) centers are the deficiency in understanding medicinal chemistry and drug discovery in academia. Moreover, there is an imbalance between individually-oriented technical professions and group efforts for drug discovery (Frye et al., 2011).
In conclusion, I believe that the pharmaceutical industry can address issues of insufficient funding by encouraging the involvement of both public and private funders. It may be essential for the government to facilitate partnerships between these two parties so as to share the risks, costs, and profits, as well as combine their expertise and competencies to tackle other problems and promote development. Also, this sector can re-introduce venture capital investments, by giving the interested parties proper incentives. Furthermore, the pharmaceutical industry can eliminate the problem of high development costs by reviewing the R&D model. This framework is evidently not performing according to expectations, and thus, the drug industry can either make significant changes to it or eliminate it entirely. This sector should also educate workers on how to deal with the R&D process so as to avoid mismanagement and other negative instances such as lack of innovation. The drug personnel should also have sufficient access to education materials that cover both current and previous issues in the industry.
Ultimately, the drug industry can address the costs and R&D issues by creating an efficient research platform. That is, the pharmaceutical companies should come together and establish an independent institution that will undertake studies that are free from bias or any negative influence. Consequently, the drug sector will be in a good position to identify critical issues and develop appropriate solutions to them.
- Collier, R. (2009). Drug development cost estimates hard to swallow. Canadian Medical Association Journal, 180(3), 279-380.
- Cuatrecasas, P. (2006). Drug discovery in jeopardy. Journal of Clinical Investigation, 116(11), 2837-2842.
- DiMasi, J. A. (2006). Costs and Returns for New Drug Development. Boston: Tufts Center for the Study of Drug Development.
- DiMasi, J. A., Feldman, L., Seckler, A., & Wilson, A. (2010). Trends in risks associated with new drug development: success rates for investigational drugs. Clinical pharmacology and therapeutics, 87(3), 272-277.
- Frye, S., Crosby, M., Edwards, T., & Juliano, R. (2011). US academic drug discovery. Nature Reviews Drug Discovery, 10, 409-410.
- Munos, B. (2009). Lessons from 60 years of pharmaceutical innovation. Nature Reviews Drug Discovery, 8(12), 959-968.
