How Accounting Influences Decision Making in Drug Development
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How Accounting Influences Decision Making in Drug Development

Stacey Smith, Pharma Tech Outlook | Tuesday, March 16, 2021

All reputable enterprises use generally accepted accounting principles to handle, measure, and communicate financial data regularly, both internally and externally.

FREMONT, CA: Several of the advantages of using modeling and simulation technology are strategic benefits. Accounting systems do not readily collect these advantages. Thus, the default system for quantifying business value offers only a partial view, at best, of the value of this technology-powered solution. Here is why focusing solely on value as captured by the accounting departments could cause firms to miss some valuable strategic advantages.

Top 10 Drug Discovery and Development Consulting/Service Companies - 2020Accounting is a potential and well-established system for measuring enterprises. The Assyrians invented this system in 4,000 BCE. There are about 1.7 million accountants in the United States. Every pharmaceutical firm has a chief financial officer who runs an accounting department and functions a principled accounting system subject to outsiders' audit. The accounting system creates monthly reports covering the customer’s whole enterprise. These firms also work within an accounting budget. However, the challenge is that several projects that incorporate M & M&S don’t offer immediate and easily-measured accounting advantages. Rather, they offer benefits. These could combine faster time-to-market, higher likelihood of regulatory success and attractive reimbursement, earlier go/no-go decisions, fewer late-stage failures, and higher future sales.

In recent years, regulatory agencies have adopted PBPK models for informing drug development decisions. The US Food and Drug Administration (FDA) Guidance on Drug Interaction Studies states that PBPK is a useful tactic that can help sponsors improved design drug-drug interaction (DDI) studies, comprising dedicated trials and population pharmacokinetic studies, and quantitatively forecast the magnitude of drug-drug interactions in several clinical situations. PBPK models also may provide useful alternatives to dedicated clinical studies.

Unlike accounting, there is no system inside pharma firms for regularly measuring and reporting strategic advantages. Strategic benefits may show up years later. There are no usually accepted strategic principles for measuring strategic advantages. Much of the value will be strategic, while the costs will always find their way into the accounting system.

See also: Top Healthcare Simulation Companies

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