Assessing the Financial Benefits of Faster Development Times: The Case of Single-source Versus Multi-vendor Outsourced Biopharmaceutical Manufacturing.

PURPOSE: The extent to which new drug developers can benefit financially from shorter development times has implications for development efficiency and innovation incentives. We provided a real-world example of such gains by using recent estimates of drug development costs and returns.

METHODS: Time and fee data were obtained on 5 single-source manufacturing projects. Time and fees were modeled for these projects as if the drug substance and drug product processes had been contracted separately from 2 vendors. The multi-vendor model was taken as the base case, and financial impacts from single-source contracting were determined relative to the base case.

FINDINGS: The mean and median after-tax financial benefits of shorter development times from single-source contracting were $44.7 million and $34.9 million, respectively (2016 dollars). The after-tax increases in sponsor fees from single-source contracting were small in comparison (mean and median of $0.65 million and $0.25 million).

IMPLICATIONS: For the data we examined, single-source contracting yielded substantial financial benefits over multi-source contracting, even after accounting for somewhat higher sponsor fees.