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higher failure rate, which significantly increases the cost of research needed to ensure one successful new product. |
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As an industry average, drug development is 6070% of the total R & D budget, with the balance going to drug discovery [1]. However, no two drug companies are alike. There are small specialty drug companies seeking a niche market, large multinationals that cover all major therapeutic categories, and diversified health care product providers for which ethical pharmaceuticals are only one component of the product portfolio. The R & D budget for a small biotechnology company is almost totally devoted to research. At the other extreme, there are drug companies that focus almost exclusively on the development of products licensed or purchased from outside sources. The R & D budget for these firms is largely devoted to development. |
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In all these cases, the R & D budget is established to meet the needs of the company, not the other way around [14]. The question is not how the budget should be split between R & D, but rather, one should ask, What are the strategic objectives of the company? It is the company's strategic mission that defines the relative emphasis on discovery versus development. This defines the balance in the portfolio between the number of drug discovery approaches and the number of projects in development. Once a strategic mission is clearly stated, the budget to support the defined research objectives and development objectives is a straightforward exercise. |
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V. Factors that Contribute to R & D Costs and Ways to Control them |
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The balance of costs between discovery and development is one thing; determining the appropriate cost of discovery and the cost of development is another. Research and development strategies should not be driven by the budget, but at the same time R & D should be sensitive to the ever-rising cost of doing work and find ways to control it. Table 3 lists five factors that are prerequisites for the success of R & D efforts [15]. These factors are usually considered as measures of scientific success. However, they can also be used as a means of assessing commercial success. Since productivity and success in R & D are increasingly being defined in financial terms, these factors provide the framework for identifying improvements in R & D operations in ways that improve cost-benefit. |
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In order to do the right thing, the company must first decide what the right thing is. The company must identify what it does well (i.e., its core competencies) and what it wants to do well (i.e., its cutting-edge competencies) [14]. The |
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