This paper presents a model that characterizes the main feedback loops at the core of the so called productivity “crisis” in pharmaceutical research. For a number of years, the pharmaceutical industry has witnessed a sharp increase in R&D investment, while the number of drugs released on the market have significantly declined. Many studies have looked at the issue, but none has proposed a synthesis of these factors in a single unified systemic model. Based on a detailed and careful examination of the data for the past 15 years, and secondary studies, this paper expounds on the business behavior observed in the industry in connection to the dynamics of the drug development process. The conclusions from the results generated by this model suggest an explantory hypothesis that the productivity dynamics observed in the industy, might be due to the endogenous behavior of the firms in the sector with an overemphasis on perceived short-term gains from M&As, at the expanse of investment in R&D. The paper shows the main feedback loops of the model and illustrative results are presented.