International research: financial returns are leading for pharmaceutical companies
Financial returns are leading for investors and pharmaceutical companies in drug research. Social return plays much less of a role. At the same time, governments and non-profit organisations together account for a quarter of the funding for all drug research worldwide. This has emerged from a large-scale international study commissioned by the Dutch minister of Health Ernst Kuipers. The study was sent to the Lower House of Parliament today.
With this study, Minister Kuipers wants to create more transparency about how drug research is financed, and how financing and the choices of investors influence which drugs are developed. It is the first time that such a comprehensive global study into the financing of drug development has been conducted and made public. The research report shows that the financial risks in individual projects are high because few products make it to the finish line, but that the system as a whole is very lucrative.
Minister Kuipers: "Through smart investment strategies, the pharmaceutical sector is still one of the most lucrative sectors in the world. The challenge that lies ahead is to link financial interests to social interests, with patients at the forefront. New medicines must not only prolong life, but also deliver concrete healthy life years. This is what I want to work towards at national and international level. This is necessary to keep healthcare affordable and sustainable in the future. I am taking the results of this report as an opportunity to start the discussion with my foreign fellow Ministers of Health."
Risks
The report illustrates the complexity and great risks of drug development. Only one in thirty development attempts succeeds. Nevertheless, all projects that do not make it to the finish line have to be paid for. Drug research is therefore often a collaborative effort in which different parties contribute their expertise. It is almost impossible for one party to develop a drug from start to finish on its own.
Return
Several specialised parties carry out different phases of drug research. And different financiers try to achieve returns in these separate phases. The researchers conclude that the expected financial return is the most important factor determining whether a drug is developed to market.
This determines not only which drugs are developed, but also for which medical indication. The financial return is therefore leading and not the social return or the patient interest. Because the expected financial return is influenced by what we as a society are prepared to pay for our medicines, this is a major societal challenge. What signal do we want to send to the industry and its financiers? What are we prepared to pay, but above all: for which medicines?
The research report also shows that governments and non-profit organisations together account for a quarter of the funding of all drug research worldwide. Large biopharmaceutical companies finance about two-thirds, and venture capital funds invest the remaining ten percent.
Further research
The research was carried out under the guidance of a scientific advisory committee by an international consortium of three research agencies: Netherlands-based SiRM and the London offices of L.E.K. Consulting and RAND Europe.
The research was carried out without policy recommendations and the data found will be made widely available. Minister Kuipers invites researchers to view this report as a basis for further research. The report brings together a great deal of knowledge in a well-organised manner, thereby deepening and broadening the understanding of the financial ecosystem of medicine development. The report contains many insights that can be interesting and useful for countries worldwide.