A new study recently calculated the development costs of 10 new anti-tumor drugs over the 10-year period between 2006 and 2015, and found that the median development time for these 10 drugs was 7.3 years and the median cost was $ 648 million, which would be $ 757 million per drug with the 7% opportunity cost. Four years after the median listing, the total sales of these 10 drugs were $ 67 billion and the median sales were $ 1.66 billion.
The study was conducted from December 10, 2016 to March 2, 2017. The data of 10 listed pharmaceutical companies were analyzed. Each of the 10 companies approved one cancer drug. The cumulative R&D expense was estimated from the date when the drug development was initiated until the date of the approval day, and the sales revenue was from the date of approval to the day when the study was completed. It cost the 10 companies a median time of 7.3 years (range from 5.8 to 15.2 years) to successfully develop a new cancer drug. Five drugs (50%) received accelerated approval by the FDA and the other five (50%) received routine approval. The median cost of drug development was $ 648 million (range from $ 157.3 million to $ 1.958 billion) and would be $ 757.4 million (range from $ 203.6 million to $ 2.0171 billion) considering the 7% annual cost of capital (or opportunity cost). Median cost was $ 793.6 million (range from $ 219.1 million to $ 28.271 billion) if 9% of the annual cost of capital was considered.
Since the approval, the median time to market for the 10 drugs was 4.0 years (range 0.8-8.8 years) with a total sale of 67 billion U.S. dollars, while R & D spending totaled 7.2 billion U.S. dollars (would be 9.1 billion U.S. dollars including 7 % of the opportunity cost). The revenue since approval was huge for a single drug (the median was $ 1,658.444 million, ranging from $ 203.1 million to $ 22.275 billion).
In an article related to the project, two previous methods of calculation were mentioned, one was the analysis of Public Citizen, which is based on public filings with the U.S. SEC for all major pharmaceutical companies over a seven-year period, dividing the total cost of all companies by the number of new drugs approved in the next seven years. The other method came from the Tufts group, which used private data from 10 pharmaceutical companies to estimate and synthesize information on the number of compounds studied by these 10 companies in clinical Phase I to III trials. By summing up the costs of these studies, the Tufts team concluded that $ 14 was needed to develop a new drug and an additional $ 1.2 billion in capital or opportunity costs (possible return on investment if the same funds were given to money managers instead of sued in drug development).
However, the article author professor Vinay Prasad believed that neither approaches were perfect. Public Citizen’s analysis divided the total spending over seven years by the total amount of new drugs approved for the next seven years and did not reflect the actual costs of listing the particular drugs. While the analysis by the Tufts team was not transparent and the number of drugs developed by the firm and the costs of clinical trials used in the analysis was not externally scrutinized.
Vinay Prasad has always been picky about the pharmaceutical industry. He is not only strongly opposed to replacing end-of-market drugs with PSF, ORR, etc., but even finds some problems about Kymriah, whose effective rate is 80% to the end-line ALL, such as some patients can’t afford the treatment of the therapeutic center and the disease is too serious to wait for treatment programs. Therefore, Vinay Prasad published this article is not to simply calculate the cost for the manufacturers, but show the extreme distrust in their R&D cost data and to question the statement that high drug prices are aimed to continue the development of this argument.
As a result, Vinay Prasad decided to change his mind and approach by focusing on listed pharmaceutical companies that have only one drug approved by the FDA and using SEC filing data from the time when it was discovered or the initial acquisition of the drug to the drug’s approval to estimate the cost of a new drug developing and marketing.
The 10 drugs were approved by the FDA between March 2007 and October 2015. Five (50%) of the drugs (ponatinib, brentuximab vedotin, cabozantinib, ruxolitinib and eculizumab) was independently developed by the company, while the other five drugs were obtained from outside. With the exception of enzalutamide, all nine other drugs received orphan drug status from the FDA, with a median of 3.5 drugs out of 10 companies were in clinical development (range from 2 to 11) for the range covered by this study.
There are several external studies that support the universality of this analysis. Firstly, the median duration of drug discovery from compound discovery to approval was 7.3 years, and the span was very big (6-15 years), which was in line with the other studies. Secondly, the author analyzed the drugs approved in the past decade. 60% of the drugs were approved on the basis of progression-free survival or response rate (ie, alternative clinical endpoint), and 40% of the drugs were approved based on overall survival and the patient reported results or other endpoints. These percentages are similar to those of all recently approved cancer drugs based on alternative clinical endpoints. Thirdly, the author’s analysis covered new drugs (50%) and next in class (50%) drugs, a percentage similar to the percentage of newly approved next in class drugs. In other words, although the sample size is small, the data set for this study is similar to the general characteristics of approved cancer drugs.
Another bright spot in the analysis is that sales of these drugs after approval are substantial. Revenues since the approval are as low as 203.1 million US dollars and as high as 22.275 billion US dollars. All 10 drugs are currently patent and/or market-exclusive and have a median duration of 4 years since approval. Previous statistics show that the average length of exclusivity on the oncology drug market is 14.3 years. As a result, the revenue from these 10 drugs will continue to increase over time, and the analysis in this article about the far more than approved R&D expenditures is consistent with the previous analysis. Their findings suggest that in the United States, the excess income earned surpasses the global R&D spending of many large pharmaceutical companies. However, this research method also has problems such as the opaque development data.
In general, the analysis provides a transparent estimate of R&D expenditure on cancer drugs and will have an impact on the current debate over drug pricing. However, there are industry sources said that in fact, there is no substantive relationship between the new drug costs and drug prices. Consumers’ (whether consumers or buyers) buying goods is not based on cost, but on the basis of value, otherwise, it is impossible for Ibrutinib whose development costs is only 390 million to get 21 billion sky-high prices with only half of its property. But drugs do differ from ordinary products. Firstly, patients’ lives will be in danger if they cannot afford the drug. Secondly, pricing power is usually not held by individual consumers, but by the government or insurance companies.