The third and final stage of clinical testing is designed to confirm the efficacy and safety of new drugs under development. Yet McKinsey research finds that, surprisingly, as many as four drugs in ten fail during this phase. To reduce the high number of late failures, pharmaceutical companies should reexamine their approach to the development of drugs and begin differentiating those in their pipelines by risk.
Failures during the last phase of clinical trials exact a heavy toll on drugmakers, since Phase III is both more expensive and more closely scrutinized by investors than the earlier stages of testing. To learn why drugs fail at this stage and the extent to which such failures are under a company’s control, we screened 656 Phase III trials that took place from 1990 to 2002. Our research concentrated on orally ingested, small-molecule drugs (excluding biologics, such as vaccines) produced by large pharma companies. Of these 656 drugs, fully 42 percent failed their trials.1
For 73 of the failed drugs, enough public information was available to analyze the cause of the failure, so we focused on them. This sample spanned a range of treatment areas, including the central nervous system, infectious disease, endocrinology,...