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and therapeutic indication have already been defined, at least conditionally. Consequently, their mandate from management is clear and direct: to move the product candidate through development so that a New Drug Application (NDA) or Product License Application (PLA) can be submitted as quickly as possible with the best chance of approval. A wide variety of studies must be carried out on this one drug, each designed to characterize its efficacy, safety, selectivity, or purity. Since much of the data generation is driven by strict and extensive regulatory guidelines, the development timetable is more predictable and lends itself to close management control. Furthermore, since many of the studies are interdependent, the development staff must work as an integrated, interactive team. All of this creates a culture that is highly structured and closely managed and in which speed and quality are the main criteria for reward and recognition. |
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III. Monitoring and Controlling R & D Costs |
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In the future, a drug's success will depend not only on its safety and efficacy, but also on its economic benefit [13]. The pharmaceutical industry must adapt quickly to concerns about drug pricing. Clearly, a drug that is cheaper to develop and produce will command a significant market advantage over an identical drug that is priced higher. The first step in improving the return on investment under restricted pricing conditions is to contain investment costs through close monitoring and rational financial controlling. |
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A. Elements of the Budget |
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It is important to note that increased investment in R & D causes a disproportionate increase in the cost of developing each successful new product. In addition to the actual cash outlays, this investment carries an unusually high cost of capital because the expenditures are made early in a very long term development process [5]. In order to control R & D costs, one first needs to know where the costs come from. Table 2 shows the major elements of the R & D budget and their relative magnitude. The cost of drug discovery, especially for a company that emphasizes intramural research, is largely the cost of the scientific staff. Personnel-related costs may account for as much as 2530% of the entire R & D budget. If intramural research is emphasized, materials and facilities needed by the scientific staff to support state-of-the-art research will also be high. Outside contracts usually supplement research, especially in areas in which intramural expertise does not exist or is not cost effective. In companies that do not emphasize intramural research, contracts will account for the majority of the discovery budget. |
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