Waning pandemic dents drug company returns

Manufacturing medicaments became less profitable last year after stripping out the cost of producing drugs. © Keystone / Gaetan Bally

A brief period of bumper profits for drugs manufacturers appears to be closing with the Covid-19 pandemic coming under control.

Pharmaceutical companies recorded a much lower return on their investment for producing medicines last year compared to 2021, according to a new study.

Consultancy firm Deloitte and the Centre for Health Solutions measured the cost of research and development (R&D) against drug sales among 20 of the world’s largest pharma companies.

In 2021, at the height of the pandemic, revenues outstripped R&D costs by 6.8%, but this figure fell to 1.2% last year.

Around half of this reduced return on investment was put down to decreasing demand for new Covid-19 drugs and treatments.

Other factors are inflation, logistics bottlenecks and the increasing length of time it takes to get some drugs onto the market.

As the pandemic put hospitals under pressure, global regulators allowed some treatments, including vaccines, to fast-track through the system.

But any hope of this trend continuing have been dashed. “The anticipated impact of Covid-19 on cycle time acceleration last year has not continued,” the report states.

The average development time for new drugs increased to 7.1 years in 2022 from 6.9 years in 2021. As a result, pharma firms expect the cost of producing new drugs to rise by $298 million to $2.3 billion (CHF2.1 billion).

Anticipated future peak sales for each new drug came down from $500 million in 2021 to $389 million last year. The 20 companies spent $139 billion on R&D in 2022, fractionally down from the previous year.

The report’s authors urged companies to improve their R&D process through digitisation.

They also warned that deteriorating political relations between Switzerland and the European Union could have an adverse impact on the Swiss pharma industry.