DrugCo is less profitable than competitors despite launching the same number of approved drugs. Analysis reveals the client approves more drugs in early phases (Pre-Clinical through Phase 2) than the industry, but these later fail in Phase 3. This creates higher aggregate R&D costs per approved drug. The solution requires implementing stricter early-stage approval criteria.
Key Insights:
- Approval rates are inverted: client has higher approval rates in Pre-Clinical/Phase 1/Phase 2, but lower in Phase 3 compared to industry
- The cost structure problem: later development phases are exponentially more expensive to test, so allowing more drugs to advance to Phase 2-3 increases total R&D spend despite same final launch volume
- Root cause is operational: lax approval standards in early phases rather than drug quality differences
- Solutions span multiple levers: financial incentives, management pressure, equipment upgrades, and employee expertise development