Modelling the Risk–Cost Trap: A System Dynamics Approach to Declining Productivity in Pharmaceutical R&D

Thursday, July 16, 2026, 8:00 PM

Session: SOC Poster Session (Virtual 2) (Virtual)

Pharmaceutical drug development is characterised by extreme costs, lengthy timelines, and low success rates, with only ~10% of compounds entering clinical trials reaching approval. These conditions create a self-reinforcing trap: risk aversion diverts capital toward safer, lower-value projects, suppressing investment in innovative candidates and perpetuating declining R&D productivity. Structural discontinuities — valleys of death — further fragment the pipeline across academic, biotech, and industry actors with misaligned incentives. This study presents a system dynamics model integrating six subsystems (drug discovery, preclinical development, Phases I–III, regulatory approval, patient dynamics, and spending dynamics) in Stella Architect. Development combined semi-structured expert interviews with literature-based parameterisation; calibration uses differential evolution against published data on R&D expenditure, attrition, and approval timelines. The model structure is complete and calibration is underway, with sensitivity analysis and stakeholder validation to follow.