4. Economies in drug R&D process
In this session we have analyzed the economies of scale, scope and learning in the drug R&D process.
The drug discovery process can be divided into several steps: Research activities (including Target biology, Chemical design & synthesis and Lead optimization), preclinical development and clinical development. As shown in the figure below, this process takes several years and encompasses a wide range of expertise and skills.
Economies of Scale:
Among the factors we have identified to increase scale and reduce R&D average costs, the use of new technologies is at the top of the list. By investing in capital intensive technological advances screening rates are increased and unit costs lowered.
All the R&D processes are today carried via personal computers and software developer skills are a key requirement for scientists. The improved efficiency is due to the use of computer based programming for target diseases that have speeds up use of existing “keys & locks” in database to find match.
The increased scale of production is associated with innovative changes in the R&D. Large firms are using their capital to acquire small companies which have innovative ideas and interesting portfolios. Moreover
Bibliography: Besanko et al (2007). Chapter 13. The Origins of Competitive Advantage: Innovation, Evolution and the Environment Besanko et al (2007). Chapter 12. Sustaining Competitive Advantage (in particular pages 406 to 422) Grant (2008) Chapter 11 Technology Base-Industries and the Management of Innovation Pisano, G. (1997). The Development Factory: Unlocking the Potential of Process Innovation. Harvard Business School Press. Werth, B. (1994). The Billion-Dollar Molecule. New York: Touchstone Book, Simon & Schuster.