Industry Must Align Compensation with Entrepreneurial Decision-Making in Drug Development

Biopharma companies struggle to encourage scientists to make tough calls about abandoning failing drug candidates early, despite recognizing this skill as increasingly valuable given that most drug candidates fail before reaching market. While researchers can identify program risks, organizational incentive structures continue to reward advancement to the next milestone rather than sound business judgment, leading to unnecessary investment in doomed projects. Major consulting firms like EY and KPMG are already restructuring compensation and hiring practices to prioritize entrepreneurial thinking and decision-making skills, suggesting biopharma should follow suit.

The pharmaceutical industry faces a fundamental misalignment between what it values and what it rewards. While companies recognize that early termination of unsuccessful drug programs saves substantial resources—given that only about 29% of Phase 2 candidates advance to Phase 3—their compensation structures continue incentivizing scientists to push programs forward regardless of merit. This creates perverse incentives where researchers advance failing candidates simply to reach the next funding milestone, ultimately wasting millions in development costs on projects unlikely to succeed.

The author cites recent shifts by major consulting firms as a potential model for change. Ernst & Young and KPMG have begun explicitly rewarding judgment, critical thinking, and business acumen through substantial bonuses and curriculum redesign. These approaches suggest that when organizations genuinely want to cultivate entrepreneurial decision-making, they must make those competencies as visible and financially rewarded as technical expertise, moving beyond training programs to structural compensation reform.