This is the first of a two-part series on drug development inefficiencies: Part I | Part II

According to the Pharmaceutical Research and Manufacturers of America (PhRMA), there are currently more than 5,000 potential new drug treatments in clinical trials. Yet every year the U.S. Food and Drug Administration (FDA) approves fewer than 50 new drugs, and many of these approvals include new indications for previously-approved drugs.

The dismal success rate is often held up as proof that drug development is difficult and high risk. And the industry and investors continue to believe that more shots on goal means a higher probability of something useful making it through the drug development and regulatory gauntlet.

OK, so clinical drug development is difficult, but is it unnecessarily inefficient?

There are two kinds of drug development inefficiencies. The first is operational inefficiencies that have to do with process and execution. The other is inefficiencies that result from too many compounds introduced into the clinic before they have been appropriately vetted. Both of these inefficiencies are sustained by subtle but real conflicts of interest having to do with investment (stock price) and employment issues (job security and compensation).

Whatever numbers you want to look at in defining pharmaceutical drug development, you will come to the same conclusion that it is inefficient. It takes too long, costs too much and in more cases than not, delivers poor results.

You have two large, profitable industries (pharmaceuticals and biotechnology) focused and dependent on developing new drug treatments. Tens of billions of dollars are spent every year on thousands of trials in hundreds of thousands of patients in countries around the globe.

While the money involved is staggering, just think about the number of companies and the number of people working on drug development (don't forget to include governments, contract research organizations, disease-focused nonprofits and academia). All of these resources to generate fewer than 50 new drugs per year?

Can drug development inefficiency be resolved? Perhaps not entirely, but there are plenty of opportunities for improving operational efficiencies.

For example, new compounds should spend more time in preclinical and early development (Phase I and Phase II trials) rather than rushing them to larger, more expensive Phase III trials. Besides, how do you get all the way to late Phase III trials or even an FDA advisory board or NDA submission only to find out you have a safety issue or your trials don't show sufficient efficacy (often no better than placebo) to warrant approval?

More intense and perhaps more discerning early development work are almost certain to give clues to many of these negative later findings. If for no other reason, more in-depth early development work could increase the probability that larger Phase III trials have the necessary design elements (including statistical basis) that will lead to more definitive positive regulatory answers to efficacy and safety.

OK, so why do we have such blatant inefficiency, and why isn't somebody doing something about it? More importantly, why do investors tolerate it? Some might blame the inefficiencies on FDA requirements. Others just believe industry rhetoric and accept it as "the norm."

In the next post we'll discuss another, less-talked-about reason for drug development inefficiencies.