For most of their history, pharmaceutical companies’ core mission has consisted of developing new drugs to advance medical care. But over the past several years, drug companies’ return at this central task has steadily declined, which has put pressure on them to reduce research and development funding, and enter partnerships that don't require the fixed costs of their own laboratories and employees.

The latest annual study of R&D productivity by Deloitte and Thomson Reuters found that the number of new drug approvals increased by around 30 percent, yet the expected revenue from these medicines actually fell by a similar amount.

In total, the world's top 12 research-based pharmaceutical companies had 41 new drugs approved in 2012, with combined forecast revenues of $211 billion, compared with 32 products with expected revenues of $309 billion a year ago.

With an average internal rate of return (IRR) from R&D in 2012 of 7.2 percent -- against 7.7 percent and 10.5 percent in the two preceding years – drug makers are barely covering their average cost of capital, estimated at around 7 percent.

For the 12 companies, the average cost of developing a new medicine between 2010 and 2012 has increased by 4 percent, from $1,089 million in 2010, to $1,137 million in 2012.

There is wide variation between the 12 companies. The most successful company in the group spent just $315 million to develop a new drug, while at the other extreme one firm spent $2.8 billion.

Even if an increasing number of new drugs start rolling down the pipeline, and some of them actually achieve blockbuster status, experts claims this still won’t help Big Pharma’s financial position. Such hypothetical new drugs will essentially just replace the sales from products now losing patent protection.

Patent expirations for lucrative blockbuster drugs eroded third-quarter sales for top drug makers Eli Lilly & Co. (NYSE:LLY), Bristol Myers Squibb co. (NYSE:BMY), Merck & Co., Inc. (NYSE:MRK) and Pfizer Inc. (NYSE:PFE), as they faced competition from low-cost generic drugs.

Both Lilly and Bristol-Myers posted third-quarter earnings below analysts’ expectations, while Merck topped expectations with the help of its next blockbuster product -- the Januvia/Janumet franchise that together brought in nearly $1.4 billion in the quarter.

Sales of Lilly’s antipsychotic drug Zyprexa, which lost patent exclusivity in October 2011, fell 68 percent to $375 million in the third quarter. The drug once brought in more than $5 billion annually. Lilly will also lose patents protecting the antidepressant Cymbalta and the insulin replacement drug Humalog next year.

Demand for Bristol-Myers’ blood clot preventer, Plavix, which had been one of the world’s best-selling drugs until its American patent lapsed in May, plunged 96 percent to $64 million.

Singulair, Merck's best-selling drug that treats asthma and allergies, lost U.S. patent protection in August and saw sales tumble 55 percent to $602 million for the third quarter. The drug is due to lose patent protection in major European countries in February.

Cholesterol fighter Lipitor, which once brought in as much as $13 billion a year for Pfizer, got generic competition in the U.S. last November. Sales of Lipitor, which is still under patent in some other countries, dropped 71 percent to $749 million in the third quarter.

Industry observers expect market conditions for pharmaceutical companies to continue to be challenging. Dynamics such as the U.S. fiscal cliff, the potential that some countries might exit the euro zone, changing patterns of demand and continuing downward pressure on health care budgets, present the industry with a volatile and highly uncertain economic environment in which to operate, let alone drive productivity improvements.

The companies analyzed in the study were Pfizer Inc. (NYSE:PFE), Roche Holding Ltd. (PINK:RHHBY), Novartis AG (NYSE:NVS), Sanofi SA (NYSE:SNY), GlaxoSmithKline plc (NYSE:GSK), Johnson & Johnson (NYSE:JNJ), AstraZeneca plc (NYSE:AZN), Merck & Co. Inc. (NYSE: MRK), Eli Lilly & Co. (NYSE: LLY), Bristol-Myers Squibb Co. (NYSE: BMY), Takeda Pharmaceutical Company Limited (TYO:4502) and Amgen, Inc. (NASDAQ:AMGN).