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The pharmaceutical industry has faced enormous pressures over the last few decades. Declining revenues, increasing payer pressures, and a constantly changing regulatory landscape have forced all companies to identify processes to increase productivity and innovation. However, to date, no one agrees on precisely how to measure these attributes or how to interpret these results to understand the state of the industry. We propose new quantitative measures of productivity and innovation and use these to illustrate an industry that has in recent years become incrementally more innovative and productive after years of decline.

Our proposal includes two quantitative measures of the industry based on the parameters obtained for measuring productivity and innovation. The methodology takes into account success rates for phase transitions within each year and the percent of NMEs with innovation designations. The index is calculated as:

Productivity Measures = (Success Rates PII * Success Rates PIII * % Blockbusters)1

Innovation Measures = (% First in Class * % Rare* % Priority Designation)2

Figure 1: Productivity and Innovation Index. Data calculated adding the parameters instead of multiplying.

Calculating the index in this manner we see that with the exception of 2013 the industry is witnessing incremental, if any, gains in both productivity and innovation. While 2013 saw an increase in productivity, fuelled by an increase in the percentage of blockbuster drugs, it was at the expense of innovation, where both first-in-class and rare and orphan designations were significantly decreased compared to other years. This is best exemplified in the radar graph below:

Figure 2: Radar graph depicting the parameters by year used to calculate the Productivity and Innovation Index.

Taken together, the increase in productivity as measured by phase changes within a given year and increased innovation as measured by priority designation point to an industry that appears to be on a healthy and productive cycle after the reported decade of decline. In addition, benchmarking the current state of the industry by these measures will allow a more quantitative view of the state of the industry and can be used to measure improvements in both productivity and innovation.