Anyone working in the pharmaceutical industry is well aware of a much-chronicled problem: low product innovation despite record amounts of spending on research and development (R&D) by the pharmaceutical and biotechnology industries.

A recent analysis by the Pharmaceutical Research and Manufacturers of America (PhRMA) and Burrill and Company (San Francisco) revealed the latest numbers: US pharmaceutical and biotechnology research companies invested $58.8 billion in R&D in 2007, a record amount and an increase of $3 billion over 2006. (see “R&D Spending by US Pharma and Biotech Firms Reaches Record High,” in the Apr. 3 edition of ePT.

Strong R&D spending is typically a sign of health of an industry sector, revealing confidence to reinvest in a business and drive future growth.

But for the pharmaceutical industry, these unprecedented levels of R&D spending reveal more the futility of the industry than its success.

In 2007, the US Food and Drug Administration’s Center for Drug Evaluation and Research approved 17 new molecular entities (NMEs) and two new biologics license applications. The 17 NMEs matched the most recent low of 17 NMEs in 2002 and were the lowest number of NMEs approved since 1983, when 14 NMEs were approved (see “New Drug Application Approvals and Receipts, Including New Molecular Entities, 1938 to Present”).

Rather than wearing high-levels of R&D spending as a badge of honor, the pharmaceutical industry needs to take a hard look at its R&D process to cut costs and simultaneously increase output to improve its return on investment (ROI).

Some assert that new drug approvals are down as a result of the more cautious path taken by FDA over the past several years in the wake of safety concerns over high-profile-product withdrawals, such as Vioxx.

But is it a case of regulatory caution, a lack of effective research, or a combination of both?

What do you think? Leave a comment below.