Product development expenditure

Each company with sales to the NHS of more than 1 million per annum has to supply financial information and those with sales of between 1 million and 25 million will have to supply full audited accounts. Companies with NHS sales greater than 25 million will have to submit a full annual financial return (APR). Products with NHS sales of greater than 100 000 and 500 000 will have to be specifically identified. These annual returns cover the overall sales to the NHS and the costs incurred, such as research and development expenditure, manufacturing costs, general administrative costs, promotional expenditure and capital employed. (Details of specific produce costs or sales are not required.)... 

Berndt, Cockburn, and Grepin (2005) employ the number of medical indications to measure pharmaceutical innovation. A substantial share of industry research and development expenditures, estimated at between 25% and 30% (p. 45), is directed toward finding new indications for existing products. Berndt et al. use the term incremental innovation to describe these efforts. For the three therapeutic areas they examined, the number of FDA approvals for new indications increased substantially in the past decade (p. 27). In addition, the greater number of approved indications has led to increased utilizations of the drugs concerned (p. 41). On that basis, they maintain that reported declines in pharmaceutical research productivity are overstated. 

While their previous study estimated R D expenditures per new drug at 231 million in 1987 dollars, their more recent one provides an estimate of 802 million in 2000 dollars. These figures indicate sharply higher costs for new product development. From this vantage point as well, the growth of a science-based research effort has not reduced research costs but led to higher ones. 

The effectiveness of various measures to contain expenditure on medicines in the UK can only be assessed in the context of the situation in other European Union countries. Table 21.1 gives data for the total expenditure on health care as a percentage of gross domestic product (GDP), expenditure on medicines as a percentage of total healthcare spend, the national pharmaceutical industry s research and development expenditure in euro-millions, the general price index and the medicines price index nationally compared to a European price of 100, and the national pharmaceutical consumption per capita expressed as defined daily doses (DDD). These comparisons are based on OECD Health Data 2000. 

Although data on research and development expenditures are not readily available on the basis of productive units, divisions, or lines of business, an informal review of the activities of corporations with large investments in research and development shows that they tend to support business lines that fall neither at one extreme nor the other but are in the technologically active middle range. Such productive units tend to be large and to have a large share of their markets. [5]... 

If corporate headquarters put too much emphasis on return on investment (ROI) (section 6.11.1) then the operating divisions will distort the information they send to top management. There could also be a temptation to maximize short-run profits (perhaps by cutting product development or marketing expenditures). On the other hand, if the divisional level exerts too much control, some of the more successful divisional managers may disguise performance in order to thwart attempts to use their profits to strengthen other divisions. 

Less Research development Expenditures on new products or processes... 

Ciba is a leading global player in the fine chemicals and additives world, with an extremely wide range of products for the plastics industry and other applieation sectors. The plastics additives cover most of the categories discussed in this report, with particular depth and strength in stabilisers. The company also has many interests outside plasties such as coatings, water and paper treatment, and home and personal care products. Ciba Specialty Chemicals is valued at around CHE 100 billion. Research and development expenditure in 2003 amounted to US 227 M. 

A few companies have reduced their commitment to polymer additives. The Swiss company Lonza places increasing emphasis on pharmaceutical intermediates in its European operations, but also makes oleochemicals for plastics. Other additive products include plasticisers, both general-pm tose types and linear phthalates, together with polymeries and trimellitates. It is a leading supplier in the US of polymer lubricants such as EBS (ethylene bis-stearamide) and other amide waxes. First half profits overall were down 16% in 2004. Research and development expenditure in 2003 amoimted to US 65 M. A new CEO, Stefan Borgas, has been appointed from BASF. 

Polymer blends as products have been the result of billions of dollars of research and technology development expenditures. By 1982, the per annum worldwide sales of polyphenylene/polystyrene exceeded US 1 billion. Polyvinyl chloride/ acrylonitrile butadiene styrene (ABS) blends have captured the markets worldwide. Compatibilized nylon/ABS blends appeared on the market and were sold under the name Triax 1000 by Monsanto with step-change improvement in product performance properties. 

It is worthy of note that in many instances, engagement by senior management with the product development process tends to be high in the initial phases of the development process once the concept has been sold and the project team set up. After these initial phases there is often a falling off of involvement until the point at which significant expenditure begins at the prototype stage, by which time it is possibly too late to influence matters ... 

Businesses around the world spend billions every year on better products and processes. Products and services along with the supply chains that deliver them are on the move." They are constantly changing in new and unexpected ways. Most of the investments made in what we broadly refer to as "product development" or "operations" have at least some, and more often a lot, of impact on the supply chain. These expenditures include product research and development, systems upgrades, capital investments in brick, mortar, and equipment, and even enhancement of employee skills. Managers are faced with a myriad of choices asking, "What should I do next "... 

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