World’s top pharmaceutical companies are heading for a major crisis as they are continuously failing to bring out new molecules with potential to turn them into blockbusters. At the same time the R&D expenditures of most of these companies are steadily on the rise. A situation like this if persisted can endanger the very existence of these companies as their profitability is getting eroded. The trend of failing R&D in pharmaceutical industry is illustrated by a recent  study of R&D expenditures of 15 top global pharma companies conducted by Pharmabiz. The study shows that during the first half of 2011, these companies spent 8.2 per cent more on R&D at 41.06 billion US dollars as compared to the same period of the previous year with no major breakthrough products. In 2010, the R&D expenditure of these 15 global pharma companies went up by 15.5 per cent at 88.60 billion dollars. However, R&D expenditure as percentage of pharmaceutical sales of 15 companies remained unchanged at 17.8 per cent during first half of 2011. Novartis, AstraZeneca, Eli Lilly and a few others have stepped up their R&D expenditures during the first half with Novartis spending 16.7 per cent more, Eli Lilly  spending 7.1 per cent more and AstraZeneca 2.1 per cent more. Pfizer, Merck & Co and GSK spent slightly less on R&D during the first half of 2011. Pfizer's R&D spending declined by 1.7 per cent to $ 4.33 billion during the first half while that of GSK’s R&D expenditure declined by 12.9 per cent to $3.09 billion during the same period.

This is happening at a time when more and more products of top companies are losing their blockbuster status. Over a dozen products of top companies have lost their blockbuster position during the first half of the current year on account of a steady drop in sales. It is likely that several other blockbuster products may also face declining sales in the second half of 2011. Pfizer is going to witness the biggest setback of its life time in the current year when  Lipitor loses its patent in November hitting a revenue stream of $10 billion. The problem with the global pharmaceutical industry is not that they are not getting enough drug candidates from their research labs but these candidates are not reaching the market place. Take the case of two largest pharma companies, Pfizer and GSK. Pfizer has 25 products in the Phase III as on August 11, 2011, 31 projects in Phase II and 37 in Phase 1. GSK is expected to have 15 products in Phase III by the end of 2011 and by the end of 2012 it expects to have  more than 30 in Phase III. Now the question is how many of these candidates would be able to pass the regulatory hurdles. The number of new drugs approved for marketing has been steadily falling despite rising public and private spending for research and development. Approval of new drugs by the US FDA  has dropped from an average of more than 35 a year in the mid-1990s to just 20 in 2009. For the regulatory authorities, clearances have to be tight as increasing number of drugs are failing in the market after the marketing approvals are given. R&D in pharmaceutical industry is thus becoming a less productive activity and therefore a burden on the company managements. It is time for global pharma to invent new strategies in drug research instead of just spending more every year.