How much does it cost to market a new drug?
How much does it cost to market a new drug?
Some say traditional estimate is inflated
How much does it really cost to bring a new drug to market?
According to the pharmaceutical industry, about $500 million — a figure that’s scared off plenty of would-be investors from tackling new drugs for TB, where the market is perceived to consist mostly of poor people who can’t afford to pay.
In truth, the $500 million estimate is a gross overestimation, some analysts charge. To get a clearer sense of the cost, take whatever number companies quote, divide it by two, and knock off a zero — for a much more modest $25 million — and you’ve got a rough starting point, says Jamie Love, director of the Consumer Project on Technology at consumer activist Ralph Nader’s Center for the Study of Responsive Law.
Love bases his calcu lations on tax credits claimed by the drug industry under the auspices of a tax code provision intended to spur research on orphan diseases. The provision affords a tax credit worth 50% of what drug companies expend on trials of drugs in humans.
What are the true development costs?
Between 1983 and 1993, 93 new drugs for AIDS — a disease that still qualified as an "orphan" in those years — were approved by the Food and Drug Administration, Love says. Across the board, industry claimed to have spent $213 million on clinical trials for the 93 drugs, a figure that includes trial work done on drugs that didn’t pan out, he says. Last year, he adds, there were 18 orphans drugs approved, and the government handed out $40 million in tax credits. "So they were spending about $2 million to $3 million per drug."
One thing such numbers don’t consider is the expense of pre-clinical development. But much of what Love calls the "heavy lifting" of pre-clinical work gets financed by public dollars, such as the $65 million the National Institutes of Health spends each year on TB research. Plus, trying to tie all of a company’s overhead to "research and development" is simply too amorphous a practice to stand up to real-life accounting practices, Love adds.
"There’s a real danger of being too theoretical," he argues. "I mean, if you tell me you go on a trip and spend $600, am I supposed to say OK? Or do you have to show me a list of itemized expenses?" The $500 million figure, he adds, shrinks a lot once specifics are provided, as they must be to claim the orphan-disease tax credit.
Others agree. "Five hundred million dollars? That’s a ridiculous figure," says Carol Nacy, PhD, Sequella Global TB Foundation’s director. "They get that number by amortizing their entire overhead — salaries, benefits, travel expenses, you name it — and then dividing by the number of drugs they bring to market in a given year. And sure, if you’re going to set up a huge pharmaceutical company, and you have a huge overhead, you’re going to be inefficient at drug development — and they are!"
In fact, it’s possible to bring a drug to early clinical efficacy trials for between $10 million and $15 million, says Nacy. Throw in another $10 million, she adds, and it’s possible to bring the drug through Phase 3 trials.
Smaller cost estimates doomed to fail?
Gordon Douglas, MD, retired head of the vaccine division at Merck and new director for TB advocacy at Princeton Project 55, says he doesn’t think that’s realistic.
"That $500 million is not inflated; it’s probably representative when you adjust for risk," he says. "And yes, you could say the drug companies are inefficient, but the purpose is not to squander the money on frivolous research! Everyone thinks they can get away with doing this work for less, so they go out and raise just that amount of money." But they’re going to fail, he says. "And that’s what bothers me most about this."
TB spending has to increase
What’s really needed is a boost in both public and private funding, says Douglas, which can only be accomplished by better advocates who make more noise on behalf of TB at both levels.
Ann Ginsberg, MD, PhD, head of for TB research at the National Institutes of Health, agrees with Douglas that more money all around would be a good start. Spending $65 million a year on pre-clinical development — the total sum allotted for TB research by the National Institutes of Health — simply won’t suffice, she contends; at the same time, it’s ridiculous to think a drug company could put forth that kind of effort for long. "You’d be thrown out if you tried to do that in private industry," she says.
What’s needed is a lot more money in both public and private sectors, she adds — that, and a fresh look at the marketplace. "We in the public sector need to get rid of as much risk as we can for industry. We also need to help industry see the market may be a lot better than they think."
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