Medical innovations are taking place in a number of key areas. Some, like vaccines, have been around for a long time, but offer hope in preventing new diseases. Others tap into the cutting-edge of molecular biology to provide treatments and cures at the cellular level. All are required to go through the FDA’s review process to ensure that they are safe and effective for their intended use.

An Involved Process

While “eureka” moments capture the imagination, the truth is much more laborious and deliberate. Drug companies must develop thousands of compounds until they find one suitable to test on humans. In addition, the time required to conduct clinical trials necessary to secure FDA approval has steadily increased from an average of 4.6 years in 1990–1994 to an average of 7.1 years in 2005–2009.1

To attract investors to an area where 9 of 10 clinical programs fail, where the few successful programs have only a limited exclusivity period in which to obtain a return on all of that prior investment, a reasonable return is needed. And, biotechnology companies need for the few successes to provide adequate returns not just for their own development, but also for all the other research that failed at some point along the way. As The Economist magazine put it, “Creating new drugs through biotechnology is at the risky end of a business in which super human stamina and bottomless pockets are minimum requirements.”2

Given the enormous amounts of capital and time required to bring a drug through the development and approval process, the vast majority of biopharmaceutical companies — 90 percent — are unprofitable and the industry as a whole ranks a mediocre 45th in return on equity. 3

The Challenge Ahead

Innovation is about a new way of thinking to improve everyone's lives. This is the challenge we face at this moment: Is the system ready for the types of cures, diagnostics and transformational therapies that biotechnology will make possible in the coming years? We know patients are ready. But will regulation, reimbursement and market access keep pace with the advances happening in the lab, so we can get these breakthroughs to them? 

  1. Tufts CSDD, 2010
  3. Factset, BIO Industry Analysis, June 2016

Cost of Research & Development

The average amount spent to bring a new prescription drug to market more than doubled since it was last estimated 11 years ago. NOTE: All figures are inflation adjusted to 2013 dollars.5