Industry analysts have determined that the greatest amount of attrition occurs in Phase II. Kola and Landis found that 62% of compounds entering Phase II trials failed. Phase III attrition was also high, with 45% of compounds entering Phase III failing. Based on such analyses, the pharmaceutical industry speaks of the “Phase II attrition problem”, which carries over into Phase III and in some cases into the preregistration and postmarketing phases as well.
According to Charles Gombar, Ph.D., vp of R&D strategy and business improvement at Wyeth, “Phase II attrition definitely got a lot of people’s attention in the industry. Quite frankly, I was more worried about Phase III attrition, because that’s the very expensive part of development.”
Low R&D productivity, increasing R&D costs, and the impending patent expiration of blockbuster drugs (with a dearth of new high-valued drugs to replace them) have been major factors in the wave of mergers, acquisitions, and restructuring in the pharmaceutical industry in the late 2000s. A major goal of large pharmaceutical company mergers has been to reduce R&D costs via consolidation and staff reductions. Some corporate restructurings have been aimed at making large pharmaceutical companies more biotech-like, to achieve the R&D productivity of the best biotechnology companies.
However, as shown by the results of an earlier wave of big mergers in the late 1990s and early 2000s, pharmaceutical companies cannot merge or restructure themselves out of the industry’s productivity crisis, at least over the medium to long term. They need to also develop viable R&D strategies that can enable them to improve productivity.