The $2.6 Billion Pill — What’s behind this number – NEJM

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Scrutinizing the numbers

Experts are putting into question the number released as well as the methodology used by researchers at the Tufts Center for the Study of Drug Development. Actually the Tufts announced last November it had calculated the cost of developing a new drug: USD 2.6 billion.

Jerry Avorn is not the first person suspicious about this figure. Several years ago in BioSocieties, the journal of the London School of Economics and Political Science, Donald Light and Rebecca Warburton dissected the high costs of drug development in an article: “Demythologizing the high costs of pharmaceutical research“.

Along the same line of thought, Jerry Avorn is making some thought-provoking points about the Tufts number in a NEJM Perspective article. I summarized them below:

limited analysis to “10 unnamed drug makers provided on 106 unnamed investigational compounds that they had self-originated.”

transparency issue: “numbers on which the analysis is based are not available for transparent review.”

capital costs were not updated to take into account the current interest rates: “capital costs were assessed at 10.6% per year, compounded — despite the fact that bonds issued by drug companies often pay only 1 to 5%.”

lack of consideration for “large public subsidies provided to pharmaceutical companies in the form of research-and-development tax credits or substantial payments received from the federal government for pediatric clinical activities.”

no acknowledgment for “drug-development costs borne by the public for the large number of medications that are based on external research that elucidated the disease mechanisms they address.”

opportunism by industry players as “some of the most important recent new medications were not developed by large drug manufacturers but were acquired through purchase of the biotech firms that discovered them. These, in turn, are often spinoffs based on the discoveries of NIH-funded university research laboratories.”

Beyond these methodological issues, there are two interesting points taken from the Tufts analysis:

1. The time to get the regulatory green light has been shortened allowing drugs to be quickly available for marketing (theoretically because market access hurdles remain).

2. “The most expensive weakest link points to the limits of companies’ ability to efficiently choose compounds for development and to identify adverse effects or limited efficacy earlier in the development process”. There is a clear need for better productivity processes and improved decision-making at the core of Big Pharma R&D centers.

Conclusion

Jerry Avorn is asking for more transparency and accuracy in the determination of the costs linked to the development of a new drug as it will lead to a better understanding on what are the key drivers and what could be done to support the most useful R&D efforts.

This will definitely help the society to contain healthcare costs and give patients a real value added as well as improved outcomes.

 

NEJM Article (free)

Biosocieties Article (free)

 

More resources on Drug Development Costs

The Real Cost of “High-Priced” Drugs – 2014 – Harvard Business Review

The Ugly Cost Of Developing New Drugs — Can We Make It Prettier? – 2014 – Forbes

Does it really cost $2.6 billion to develop a new drug? – 2014 – Washington Post

The Cost Of Creating A New Drug Now $5 Billion, Pushing Big Pharma To Change – 2013 – Forbes

 

 

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