What do we Know about Cost?

From a project or portfolio perspective, we want to know how much do projects cost, how much does it cost to create drugs, or are certain therapy areas more expensive than others?

Research and Development reduce current profits, but create future profits.  Thus we want to know how much value is being created and whether that value is greater than the cost.  Understandably the real numbers are sensitive information.  Some of it companies are required to report annually.  Some of it companies also share to benchmarking consortia.  For more about benchmarking, please refer to the section Benchmarking.

Tracking Project Cost

A challenge to Finance in Bio/pharmaceutical R&D is tracking project cost.  Even though projects are an important organizing principle in Bio/pharmaceutical R&D, projects aren’t the only activity that generates cost.  As we noted in our aforementioned white paper, the project leader in Discovery does not manage cost.   The line department manage cost.  Nonetheless projects are important and questions arise as to project cost in Discovery.

In Discovery, resource is typically the major project cost (Please refer to the Section Resource Tracking).  Expendable items and capital items are handled by individual line department budgets and averaged out over the portfolio.

In Development, in-house resource is a smaller item of project cost.  External project expense (EPE) is very large, and includes contracts with clinics and physicians.  The project leader in Development is more involved with managing project cost than in Discovery.  Since many more expenses are projectized in Development, determining project cost is less challenging than in Discovery.