Industry Must Align Incentive Structures to Encourage Early Drug Candidate Termination Decisions
An opinion piece argues that pharmaceutical companies should restructure their compensation and promotion systems to reward scientists who make prudent decisions to stop or pivot underperforming drug programs early, rather than only advancing those whose programs reach the next investment milestone. The author notes that given the approximately 10% success rate for drugs entering Phase 1 trials, the ability to identify failures early and avoid wasting years and millions of dollars represents a critical business skill. The piece cites examples from consulting firms like EY and KPMG that are beginning to prioritize hiring and rewarding employees for entrepreneurial thinking and judgment alongside traditional technical expertise.
The pharmaceutical industry faces a structural misalignment between stated goals and actual incentives. While company leadership increasingly recognizes the value of early decision-making to halt unsuccessful programs—given that only roughly 10% of Phase 1 candidates ultimately reach market—compensation and advancement systems continue to reward scientists primarily for advancing programs to the next funding stage, regardless of eventual viability. This creates pressure to continue investing in marginal candidates rather than pivot resources strategically.
External industries are already demonstrating alternative approaches. Major consulting firms have begun implementing substantial financial rewards specifically for judgment and analytical reasoning, with Ernst & Young allocating $100 million in bonuses tied to decision-making skills and KPMG redesigning internships to emphasize critical thinking over routine technical execution. These initiatives suggest a broader workforce evolution toward valuing entrepreneurial assessment alongside traditional expertise.
Restructured incentive systems could potentially reduce inefficient capital allocation and accelerated timelines in drug development, benefiting patients through faster access to viable therapies and reducing wasted research resources. However, implementation challenges exist: scientists might struggle calibrating termination decisions, early-stage termination could inadvertently eliminate promising candidates with delayed efficacy signals, and compensation reform requires substantial organizational change. The approach may prove most effective when combined with clear decision-making frameworks and portfolio-level oversight rather than individual scientist assessment alone.