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    • Project Management National Conference 2011 PMI India Project Management Challenges in pharmaceutical research - balancing cost and innovation P Subramanian, PMP Project & Resource Management, Aurigene Discovery Technologies Ltd., Hyderabad, India2|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India Contents 1 ABSTRACT......................................................................................................................4 2 INTRODUCTION.............................................................................................................4 3 THE R&D PROCESS.......................................................................................................5 4 THE COST – INNOVATION CONUNDRUM...............................................................7 4.1 COSTS OF PHARMACEUTICAL R&D......................................................................7 4.2 TRENDS IN R&D COSTS AND KEY DRIVERS.......................................................8 4.3 THE INNOVATION PERSPECTIVE : R&D PERFORMANCE................................9 5 PROJECT MANAGEMENT CHALLENGES IN PHARMACEUTICAL R&D..........10 5.1 SCOPE MANAGEMENT............................................................................................11 5.2 TIME MANAGEMENT..............................................................................................11 5.3 RESOURCE MANAGEMENT...................................................................................12 5.4 PROJECT MANAGEMENT CULTURE OF THE ORGANIZATION.....................13 6 CONCLUSION...............................................................................................................13 7 ACKNOWLEDGMENTS...............................................................................................14 8 REFERENCES................................................................................................................14 9 AUTHOR’S PROFILE...................................................................................................153|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India 1 ABSTRACT The inherent technical risk in the pursuit of new drugs in the pharmaceutical industry is further compounded by additional challenges such as the regulated environment, complexity and long gestation period of new drug discovery projects. As the primary interface between science and business in this environment, project management faces a unique challenge of being able to balance cost and innovation, i.e enabling delivery of projects while ensuring that the organization is able to grow and sustain its financial progress. This balance can often make the difference between success and failure in a highly competitive pharmaceutical industry. Adding to the challenge is managing the number of iterations in a research project, incorporating these learnings and enabling the project to focus and prioritize promising drug candidates for further development. Moreover, since project durations are long, the project team develops a strong emotional attachment for the project, and it becomes hard for the team to detect and flag issues that warrant key decisions such as termination. Above all, creation and sustenance of an enterprise project management culture that is fully endorsed by top management and implemented by senior managers in a cross functional manner is a key challenge that often skews the balance between cost and innovation. The key objective of this paper is to elaborate and connect these challenges with the aim of being able postulate a robust framework to achieve this balance. Keywords: Drug discovery, cost, innovation, project management 2 INTRODUCTION The global pharmaceutical industry is complex in many respects – while the primary objective of the industry is to satisfy unmet medical needs of the patient, the economics of investment and profitability in basic R&D play a significant role in influencing these objectives. While returns on R&D are on average attractive, these vary considerably from one drug to another – one key driver for this being that consumer demand for prescription drugs are often mediated by healthcare practitioners and insurance companies in regulated markets. Although the cost of manufacturing of a new drug is relatively low, the costs of discovering, developing a drug, testing the drug through several phases of human clinical trials and finally obtaining marketing approval are not trivial, and are consequently loaded onto the price of the drug in the market. Intellectual property protection needs of the private R&D sector preclude the publishing of comparative information from clinical trials between competing drugs, thus disabling practitioners and users from exercising the right choices which in turn blocks improvement of the market signals guiding investment decisions in R&D.4|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India The primary objective of this paper is to present the author’s understanding of how these factors interact with the industry’s R&D process, so that it may be possible to position the equation between cost and innovation in the pharmaceutical R&D environment. The paper also attempts to connect the challenges at an execution level from a project management perspective, given that the R&D environment faces the additional complexities of technical uncertainties, longer gestation periods and number of scope changes during the life cycle of a pharmaceutical R&D project. The scope of this paper is primarily towards innovative drugs or NCEs (New Chemical Entities) rather than incrementally modified drugs or generics. 3 THE R&D PROCESS The pharmaceutical R&D business differs from other businesses in its complex structure, criticality of intellectual property, the ever-increasing regulatory hurdles and R&D intensiveness. The process of developing a new drug is more complex than new product development in other industries because the development is highly regulated, it takes an extremely long time to develop a product and a large amount of monetary and intellectual resources are involved. As an illustration of this point, the pharmaceutical industry has the highest ratio of R&D spending to sales (estimated at 17.5% in 2006) of any industry in the USA. There are three major steps in the life cycle of a novel pharmaceutical product: discovery, development and commercialization. Figure 1 depicts the drug development process starting from discovery. It is important to note that the phases are usually concurrent and the decision making complexity is increased due to the existence of several projects in the portfolio.5|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India Figure 1.New Drug R&D Process Source: PhRMA, 1995 The discovery stage is aimed at selecting the most promising chemical compounds from the vast set of screened compounds. The selected compound is the one that best modulates the biological target and has no obvious safety concerns when tested in animals. Preclinical testing focuses on postulating the effects and side effects of the compound when it is given to humans. In addition, compounds are patented to secure market exclusivity when the drug reaches markets. When authorities grant the approval to treat first humans, clinical trials can begin, i.e. the drug can be given to humans.6|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India In Phase I studies the drug is given to approximately 20 to 80 healthy volunteers to test the drug’s safety at a number of predetermined dose levels to see how the human body reacts to the drug. If unacceptable behavior is detected, the study and the project itself may have to be terminated. In Phase II the drug is given to few hundreds of patients with the targeted disease. In these studies drug’s efficacy is established together with the determination of effective dosage and administration frequency. Animal testing continues with long-term toxicology studies. Pilot studies are conducted in anticipation of production of the drug in larger quantities for further trials and commercialization. If the drug does not effectively treat the disease or is inferior to competing products the development may be discontinued, and the program may be taken back to discovery for further refinement. If the drug proves to be effective, authorization for starting Phase III studies is applied. Phase III trials focus on getting statistical verification of efficacy already established in Phase II studies. This is the most expensive part of drug development requiring thousands of patients and extensive global co-ordination. In addition to efficacy, drug-drug interactions are studied and comparison with competing products is carried out. Further evidence about the side effects, toxicity and general safety of the drug is sought and evaluated. Long-term toxicity studies go on together with production process optimization, plant design and manufacturing site assessment. For the regulatory approval, all documentation is delivered to the authorities. Marketing strategy is developed together with designing the promotional material and training the sales force. The commercial production facilities are built and price negotiations with suppliers and distributors are conducted. After the marketing approval is received, the product is launched. When the product is on the market, Phase IV studies are conducted to identify rare adverse events that were left unnoticed in Phase II and III studies. Furthermore, changes in the occurrence of known adverse events and new therapeutic indications are also explored. 4 THE COST – INNOVATION CONUNDRUM 4.1 COSTS OF PHARMACEUTICAL R&D Launching a new drug containing a previously unknown active ingredient can take years to develop and test – the understanding that is needed of the biological pathways that the drug needs to modulate, the creativity needed in the design of molecules and the integration of these elements into a drug that provides the correct balance of efficacy and safety is a task that requires both7|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India skill and patience. Additionally, the rate of failures in new drug discovery are considerable – for every drug that survives the rigor of development and testing, there are several other projects that do not pass the scrutiny of scientific testing and regulatory approval – these costs also form part of the organization’s R&D costs. The total cost of developing a new drug could well be much higher than these direct costs – indeed, the opportunity costs of tying up investment capital for research projects could be as high as the entire organization’s R&D spending. While opportunity costs exist in all industries and specifically for innovative products, these costs are much higher for pharmaceutical R&D primarily due to the long gestation periods associated with moving a new drug to the market. A frequently quoted study on pharmaceutical R&D cost estimates the average cost of successfully developing and launching a new drug to be $800 mn in the year 2000. Although this estimate suggests that pharma R&D is prohibitively expensive, it is important to note that this is an average that takes into account the cost of failures and certainly reflects the research strategies and choices that companies exercise based on financial parameters such as projected revenues. Additionally, R&D costs are highly variable between different therapeutic classes and indications, and are also lower for incrementally modified drugs. Over the past few years, several perspectives and arguments have been brought up on this estimate – for instance, it has been argued that while this estimate may hold good for ‘breakthrough’ drugs, the direct cost of developing an incrementally modified drug would be far lower; the fully capitalized R&D costs would be certainly less than $800 mn since the time taken to modify an existing drug would be shorter than discovering a new one. One other perspective is that these costs are representative only of big pharmaceutical firms who participated in thus study, whose research strategies are typically aligned towards chronic diseases requiring significantly more investment of time and effort. In addition, there have also been debates around excluding the opportunity cost of capital from these estimates, which would then lower the estimate to around $110 mn – however, from an economist standpoint, opportunity costs are indeed very real and perhaps should not be discounted. In summary, it appears that the average R&D costs for a new drug have a considerable variation of estimates – ultimately, these costs may not be of much help in making the decision on funding a project, since the investment decisions are also based on expected returns. 4.2 TRENDS IN R&D COSTS AND KEY DRIVERS An overview of surveys on R&D costs conducted between 1976 and 2000 seem to suggest that costs have increased nearly six fold, from an estimated $137 mn in 1976 to the current estimate of $802 mn in 2000.8|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India Some of the key drivers contributing to this growth are summarized below: • An increased number of projects that fail in human clinical trials • A trend towards lengthier clinical trials as well as a rise in the number and size of trials that firms are required to conduct for regulatory approvals • A strategic shift towards drugs intended to treat chronic illnesses • The increase in time being spent on preclinical research, so that companies are able to make more efficient decisions on spending for human trials • An increased commercialization of basic research, with firms willing to pay more for research findings that may have been freely available in earlier times 4.3 THE INNOVATION PERSPECTIVE : R&D PERFORMANCE If innovative performance of the pharmaceutical industry can be measured by the number of new drugs that make it to the market each year, then there is sufficient evidence to show that the number of new drugs introduced each year has not kept pace with the spending on R&D. From the 1970s to the 1990s, the gradual upward trend in R&D costs appeared to match the trend in number of drugs approved; however, from the mid-1990s, it was seen that the number of new approvals fell sharply, whereas R&D costs continued to rise. Measurement of performance based on number of patents granted or new drug applications also showed a similar decline. However, there are several shortcomings of such a performance measure: • The conventional measure of innovative performance does not include modifications to existing drugs which can significantly benefit consumers by either having a better safety profile or an improved form that reduces dosing to improve patient compliance. A growing share of the industry’s R&D is towards these drugs – excluding these from performance measures could be a significant omission • Conventional measures of R&D performance also do not consider the drug quality or the societal value of pioneering drugs. While it is understood that quality would be extremely difficult to measure and quantify into performance, it is important to make note of several examples of these breakthrough drugs9|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India – as an example, statins which reduce cholesterol levels did not exist a generation ago, but today are by far the biggest therapeutic class in major markets. There have also been several innovative drugs in the field of oncology that have greatly added to the quality of life for a cancer patient. In fact, there is data to show that although the annual approval of new drugs has declined over the last twenty years or so, there has actually been a slight increase in the number of pioneering treatments that have entered and expanded the markets significantly • One other shortcoming of a traditional ‘input vs output’ measurement is the fact that the new drugs approved in a given year would not be strictly due to the spending for that particular year – given the long gestation periods of drug discovery, more often than not, the investments in the preceding years bear fruit in the future years. Such a conventional measure, therefore, could significantly understate or indeed overstate productivity in a given year, and is likely to be accurate purely by chance. In summary, inspite of all the empirical evidence that is available on both cost and performance of pharmaceutical R&D, it appears that it would be difficult to draw a direct correlation between these two variables. However, there is a need to ensure that research projects are executed with a degree of rigor with the help of established project management methodologies, such that productivity improvements can be tangibly measured in an environment that is highly complex, dynamic and has several aspects that are outside the direct control of the pharmaceutical firm. The next section of this paper positions the key challenges from a project perspective, given that project management is now widely recognized as a strategic competency. 5 PROJECT MANAGEMENT CHALLENGES IN PHARMACEUTICAL R&D From the above discussion, it has become vital to reduce routine activities and speed up processes by optimizing resources. A drug discovery endeavor comprises of a number of sub-projects with cross-functional contributions from several skill areas including chemistry, biology, clinical development, process development, and marketing planning - a typical project is therefore, time, cost and resource intensive in nature. The principles of progressive elaboration are essential in this process, and planning requires a coordinated and determined team effort.10|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India Even though project management cannot guarantee the successful launch of new products, it is widely recognized as an integrating function between science and business, and thus an essential skill to facilitate the successful delivery of these projects. The primary expectations from project management in such an environment are to deliver cost-effective planning, execution and monitoring of projects; optimized business processes and resources; fewer routine activities; and faster project procedures. In order to do this, project management in R&D must be efficient and effective. In this section, the author has organized perspectives on the key project management challenges in R&D around some of the critical knowledge areas; additionally, elements of organizational project management maturity from a culture perspective are also discussed. 5.1 SCOPE MANAGEMENT In an R&D project, the project scope is usually outlined in the form of a target product profile (TPP) at the time of initiation – this involves ‘back-translating’ the commercial expectations into deliverables for defined stages of the project. However, defining this scope for an innovative drug is particularly challenging where there is lack of scientific precedence and translation between animal and human testing. The product profile is also continuously influenced by external factors such as changes in the competitive landscape or policies of regulatory agencies – it is, therefore, inevitable that scope changes will occur during the lifecycle of such a project. Managing these scope changes through a robust change control process is one of the key challenges from a project management perspective – articulating the envisioned scope into deliverables is difficult by itself, and assessing the impact of any scope changes on other aspects of the project such as cost and time is complex, variable and highly dynamic. There are also several stakeholders at various stages of the project, and the lack of differentiation between ‘needs’ and ‘wants’ often results in project scopes that are poorly articulated, and more importantly, result in a gap in establishing a change control mechanism 5.2 TIME MANAGEMENT The dependency on the scientific approach to the project, and the uncertainties associated with testing the drug in a living system make the process of time management in an R&D environment particularly complex – some of the key challenges are elaborated below:11|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India • In the early stages of a discovery project, designing and modifying chemical compounds and testing them in biological systems for effectiveness and conformance to safety requirements is paramount – this requires significant co-ordination between multidisciplinary teams. Learnings from these experiments are channeled back into the chemistry efforts, and the process of iteration continues until a suitable drug candidate is identified for further development. The presence of multiple iterative loops in this process creates challenges in terms of planning and execution • Ascertaining the granularity at which a plan needs to be baselined is another challenge – in the early stages of discovery, there are several assumptions made that get validated further downstream – incorporating all these assumptions into a project plan creates a multivariate baseline that is difficult to monitor • There are also several scenarios where additional experiments are carried out in order to generate additional data for decision making, or experiments are repeated to ensure reproducibility – these scenarios are difficult to plan and baseline 5.3 RESOURCE MANAGEMENT The process of ensuring that resources are adequately available and deployed for an R&D project with all the incumbent risks requires careful prioritization and monitoring – the key challenges faced by project management in doing this are summarized below: • From a human resource standpoint, the constitution of a project team requires a clear understanding of the fact that R&D projects are skillset driven rather than purely number driven. In an environment where such resources are rare, putting together such a team requires multiple levels of agreement to ensure commitment of the team. Also, retaining this team for projects which extend to several years is a unique challenge – ensuring that knowledge acquired during the course of the project is retained and transferred appropriately is a challenge that project management needs to grapple with constantly • From a material standpoint, rigorous planning to ensure that material and equipment are prioritized and made available to the team is critical – unless a robust portfolio prioritization process is available in the organization, this prioritization becomes ad-hoc and myopic, thereby resulting in project management playing a firefighting role rather than being able to align project goals with the organization’s strategic objectives12|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India 5.4 PROJECT MANAGEMENT CULTURE OF THE ORGANIZATION Organizations that are eager to jump onto the project management bandwagon need to realize that mere implementation of project management systems and a PMO is unlikely to deliver the expected results of a project based approach– the creation of a project management culture and its buy-in across the functional hierarchy is paramount to the sustenance of project management within the organization. Building a project management culture in an organization entails a new set of behaviors and the key to this is the acceptance of project management as a strategic competency rather than just a tactical one. The role of senior management is crucial to the success of this culture; factors such as alignment to existing organizational structures, readiness of leadership to embrace and implement this change in a consistent manner, and a vision of how the project based organization will function and deliver often make the difference between success and failure of project management initiatives. Once there is in-principle agreement on the long term benefits of a project management culture, implementation of this process involves detailed planning, sufficient resource commitment and a robust reward system. An organization that intends to develop a project management culture must not only measure the effectiveness of its systems and processes regularly ; but also ensure continuous stakeholder consensus to ensure that the project management environment can grow , flourish and thereby evolve into a truly project based organization. 6 CONCLUSION From the above discussion and analyses, it would appear that drawing a straightforward correlation between cost and innovation in pharmaceutical R&D is difficult, if not impossible – this would need a structured approach incorporating all the possible variables into an equation that can be understood at the operational level. Having said that, the balance between these two elements can largely determine the success of the organization in a complex environment. It is also beyond reasonable doubt that managing an R&D project is challenging – this problem is amplified in organizations that have multiple projects, each with their own stakeholders, resource and communication requirements, budgets and risks. The project management discipline has evolved to address these key challenges, and continues to evolve to deliver value to project based organizations. Organizations that have recognized project management as a strategic competency and integrated this discipline within their core processes have successfully acquired a competitive edge.13|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India Identifying critical success factors that lead organizations to superior levels of performance and maturity is the starting point; building these into a well- established and often, politically driven organization is the next step. Unfortunately, there is no universal path to maturity – there are no right or wrong answers to the question that organizations face when they attempt to achieve project management maturity. The answer is primarily driven by organizational priority in terms of whether it is important to drive this top down, which may work better for organizations that need to immediately prioritize their portfolio to align with strategic objectives, or use a bottom up approach, where the need of the hour is to ensure that project management practices and methodologies are in place to improve the probability of successful project execution. 7 ACKNOWLEDGMENTS The author would like to thank his current and past employers for providing the opportunity and experience to understand the challenges in implementing project management in their organizations. The author would also like to acknowledge all the inputs received from various groups of stakeholders in putting together this paper. 8 REFERENCES 1. Joseph A. DiMasi, Ronald W. Hansen, and Henry G. Grabowski,“The Price of Innovation: New Estimates of Drug DevelopmentCosts,” Journal of Health Economics, vol. 22, no. 2 (March 2003),pp. 151-185. 2. Public Citizen Congress Watch 2001. Rx R&D Myths: The Case Against the Drug Industry’s R&D ‘Scare Card’. Public Citizen, Washington, DC, 2001. 3. Congressional Budget Office based on R.W. Hansen, “ThePharmaceutical Development Process: Estimates of CurrentDevelopment Costs and Times and the Effects of RegulatoryChanges,” in R.I. Chien, ed., Issues in PharmaceuticalEconomics (Lexington, Mass.: Lexington Books,1979) 4. Cooke-Davies, T.J. and Arzymanow, A. 2003. The Maturity of Project Management in Different Industries: An Investigation into Variations between Project Management Models. International Journal of Project Management, Vol. 21, No. 6. pp. 471-478. 5. Larsen, Eldon R. 2005. Apply Project Management Concepts to R&D. Retrieved on July 12, 2008 from http://findarticles.com/p/articles/mi_qa5350/is_200501/ai_n21365554/print? tag=artBody;col114|P a g e Application of Select Tools of Psychology for Effective Project Management
    • Project Management National Conference 2011 PMI India 6. E.Verzuh, the Fast Forward MBA in Project Management, Wiley, New York, 1999. 7. R.J Graham and R.J Englund, Creating an Environment for Successful Projects, Jossey-Bass, USA, 1997. 9 AUTHOR’S PROFILE The author is the Head of Project and Resource Management at Aurigene Discovery Technologies (a wholly owned subsidiary of Dr.Reddy’s Laboratories Ltd). The author has around 14 years of experience in the pharmaceutical industry, and has played roles of increasing responsibility in areas such as strategic sourcing, clinical operations and project/program management with organizations such as GlaxoSmithKline and Dr.Reddy’s Laboratories. Subramanian_p@aurigene.com15|P a g e Application of Select Tools of Psychology for Effective Project Management