Published On: Mon, Apr 28th, 2014

Pharmaceutical research and development: Cost considerations

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(By Pharm. Nelson Okwonna)

r & d

In open economies, where channels of import and export exist, factors other than strategic intent and the availability of human and material resources, become increasingly important in deciding between alternative courses of actions. One of such factors is cost.

After the IMF instigated the Structural Adjustment Programme of 1985 – which was ostensibly designed to boost local productivity, decrease imports and launch Nigeria to a more prosperous path – suffered a colossal failure, manufacturing activities in Nigeria have never remained the same.

One major effect of the policy was the astronomical rise in the cost of raw materials like machine parts and expatriate labour (in fact, everything that came through the borders became expensive, including the factors of production). Also, there was no commensurate increase in the earning capacity of the indigenous labour force; hence those who could migrate to “greener pastures” migrated.


In sum, the effects of the policy could be described as follows:

A.   Increased cost of production due to increased cost of material inputs.

B.    Decrease in the pool of available human capital due to migration (which is more difficult to replenish).

C.    Incentives for the importation of finished goods and not for localised production.

D.   Greater barriers to manufacturing and worthwhile research and development efforts.

Sadly, from that time (1985) till now, we are still battling to find our footing. Add corruption to our challenges and you get a better picture. The aim of this article, however, is not to chronicle our predicaments but to offer a ray of light.

On 20 June 2013, the NIPRD-Industry Business Summit held at Sheraton Hotel and Towers, Ikeja. The event, which was chaired by veteran pharmaceutical industry leader, Mazi Sam Ohuabunwa, had, in attendance, other distinguished CEOs and representatives from stakeholder-organisations in the pharmaceutical industry.

The summit highlighted the earnest desire for change among stakeholders, as industry partners presented their areas of need and called for intense collaboration from NIPRD. Since then, other strategic meetings have been held to advance the cause of indigenous research and development. Still, there are many new calls for increased R&D drive from representatives of the pharmaceutical industry and my engagement with NIPRD and other pharmaceutical research organisations show that the sun shall yet shine on pharmaceutical research and development in Nigeria.

The points I mentioned much earlier were to demonstrate why this sun is apparently not shinning enough and to buttress issues that need be addressed. A major constraint is cost and one area that accounts for this cost is the clinical trial process.

But apart from cost, there is also the low adaptive capacity of the manufacturing industry and insufficient stakeholder ownership for sustaining research–industry dialogue. The recent calls by the Industry are perhaps indicative of the renewed perception among stakeholders that research & development is perhaps our visa to a glorious future; it shows that the Industry is maturing, though not fast enough, as we try to rid ourselves of the effects of the SAP policy.


On clinical trials

At present, there are very few organisations dedicated to this critical chain in the drug development process. In 2010, working for an indigenous firm involved in drug development, we were able to estimate the cost of delivering a clinical trial for an antimalarial product.

One thing that I took away from the process is that the cost is not as exorbitant as many think. This should be understood within the context of the major cost factors and the nature of the product under examination – a phytopharmaceutical. Two things are peculiar to this kind of product:

A.   WHO has made certain exceptions for Phyto-pharmaceuticals.

B.    The major cost is the human resource cost.

The National Health Research Ethics Committee (NHREC) has a clear pathway for approving clinical trials in partnership with NAFDAC and the major constraint, from my own point of view, is basically a management challenge and an insufficiency of demand by Industry. Perhaps this is because of limits in the perception of the huge opportunities that exist, a perception that I believe is rapidly changing.

To overcome the human resource cost of delivering a large scale clinical trial, I am advocating for Research–Hospital partnership. The aim is to reduce the initial cost of entry for an industry player. Consider the NIPRISAN/NICOSAN case study (which is chronicled in my book, the Heart and Art of Innovation); despite the huge investments made by NIPRD on developing the sickle cell product, the entry cost for the pharmaceutical stakeholder was $115,000 and a 7.5% of gross sales as royalties. Of course, there must have been many other operational costs.

The purpose of the partnerships would be such that the research organisation (university or institute) that did the basic research and the clinical research organisation (the hospital) are under the same umbrella as in the NIPRD scenario and would also defer gratification (accept royalty terms). The partnerships would address critical issues like:

a.     Delineating knowledge-sharing procedures for relevant stakeholders

b.    Developing human capacity for clinical trial models of major disease groups.

c.     Providing cost estimates of delivering standard protocols

d.    Developing business structures within partner organisations that defer gratification in place of a royalty agreement.


There are many benefits to this from an Industry point of view. Some of which are:

a.     Cheaper cost of entry from a go-to-market angle.

b.    Greater ease for determining potential collaborative R&D budgets.

c.     Greater opportunity for institutional gap analysis.

d.    Greater sustainability of research and development efforts.

e.     Potential for human capacity development across the value chain.

f.     Reduced fragmentation of the drug development chain.

g.    Greater room for the emergence of indigenous clinical research organisations.



The major challenge of this proposition is that the potential parties that will make a venture as this feasible are both public organisations – universities/research institutes and teaching hospitals. Bureaucracy and the usual Nigerian factors are powerful factors that must be considered. However, optimists would always choose to see the half-full glass and in this case, I believe that is exactly where we are. The water in our glass may not even be up to the half-mark but it is certainly not empty.


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Pharmaceutical research and development: Cost considerations