Cost to Develop New Pharmaceutical Drug Now Exceeds $2.5B?

http://www.scientificamerican.com/article/cost-to-develop-new-pharmaceutical-drug-now-exceeds-2-5b/

by softdev12 • 12 years ago

46 60 12 years ago

This is a huge problem (even if this number is grossly inflated) - imagine the quantity of drugs that could exist if something like this could be bootstrapped.

I realize clinical trials are really important, because accidentally killing lots of people isn't particularly desirable, but is there a way we could lower this cost? What would need to happen?

jgmmo4• 12 years ago

Get government out of the way.

Why couldn't independent labs certify and insure products, a la Underwriters Laboratories?

We could have drugs vetted by these respected medical organizations and be labeled as such, think 'mayo clinic certified', 'johns hopkins certified', etc.

jobposter12343• 12 years ago

This model sounds a lot like the Moody's/S&P ratings-agency game. The failure of the ratings system is one of the critical components identified as causing the 2008 financial crisis.

I strongly dislike the mis-alignment of incentives, where the ratings / approval group is paid by the company seeking approval. It has proven disastrous in high-money systems, and I wouldn't trust it for pharma, which has shown similar ethical outlooks as finance (that is to say, little matters except profits).

psaintla• 12 years ago

Kind of like how independent rating agencies were performing due diligence and properly rating securities before the mortgage crisis right?

matthewmcg• 12 years ago

You'd need to be careful about the incentives. UL does a good job of separating compensation for testing and development of standards.

In the other direction, paying for ratings is how we got AAA-rated subprime CDOs.

bdisraeli• 12 years ago

Why would private regulators be more efficient? Regulation will always seem inefficient no matter the nature of the regulating agency because it has different goals (ensuring safety and efficacy) vs making a profit for shareholders.

Public regulators are always preferable, when a market needs to be regulated as you admit, because the public, through the press and their elected representatives, can hold them accountable for their actions. If someone from the Mayo Clinic is receiving improper benefits from pharmaceutical companies how does the public find that out? There are no laws that would force disclosure of those relationships.

In the case of public regulators like the FDA, Congress can force its leaders to testify and the press has tools like FOIA to get at private documents. They're not perfect and can still lead to corruption and regulatory capture, but are preferable to private organizations with no public accountability regulating the pharmaceutical industry.

metaphorm• 12 years ago

you should read up about Thalidomide and then be thankful that the U.S. government "got in the way".

linker3000• 12 years ago

Imagine how the human race would progress if we didn't operate as slaves to a system of arbitrary tokens that we invented to facilitate trading.

No I don't have the answer - I ain't paid enough to work on that.

anigbrowl• 12 years ago

Those tokens are just proxies for the energy and material resources we consume. One can easily imagine power becoming too cheap to meter within a few decade, but if you want a steak someone still has to raise and feed the cow it comes from, if you want a house someone has to grow the wood or mine the metal used to build the frame, etc. etc. Money arises out the fact that resources are scarce and not always conveniently fungible.

roadnottaken• 12 years ago

Clinical trials are essential not just for safety, but to show efficacy. Most drugs fail in expensive clinical trials due to lack of efficacy. The reason the number is so large is because Pharma companies have to pay for all the drugs that failed, just to get one successful one through. I work in biotech and there are TONS of very smart people trying to make this more-efficient. It's a very hard problem -- making drugs is not easy.

throwawayornot• 12 years ago

It's all about delays due to lack of enrollment in clinical trials. A 2013 study from the same Tufts thinktank as the recent cost report says that 37% of clinical trial sites under-enroll patients and 10% don't get a single patient! Here is a market ripe for disruption: some startup needs to build the uber of clinical trial enrollment. [1]http://csdd.tufts.edu/files/uploads/02_-_jan_15,_2013_-_recr...

jodrellblank• 12 years ago

Is it a problem of "research is too expensive", or is it a problem of "we're reaching the limits of the [have symptoms / prescribe safe affordable oral drug] model of treatment and from here out it's a long tail of more expensive less effective drugs?

ebbv• 12 years ago

imagine the quantity of drugs that could exist if something like this could be bootstrapped.

That's an incredibly optimistic assumption. My mind instead immediately goes to imaging the kind of horrors people would go through if it were easier to put drugs onto the market than it already is.

We already live through people dying or developing lifelong disabilities due to medication going onto market with side effects that were not properly understood. If the barrier was lower this problem would only be worse.

Houshalter2• 12 years ago

And this is exactly the problem. People see the horrors of bad drugs. No one sees or cares about the people who die and suffer from drugs that weren't developed.

cowsandmilk• 12 years ago

3D human tissue culture is the most promising area for lowering this cost.

Unfortunately for many diseases, there are not good animal models. 3D human tissue culture allows for much better laboratory testing of efficacy and side effects. This would allow for better drugs going into clinical trials and better design of clinical trials to show a particular drug's effects.

jimrandomh2• 12 years ago

This article is a reprint of a summary of a press release based on a study, with no link to the actual study. Recent experience has lead me to be very mistrusting of things like that, so I poked around. I didn't find the actual study, but I did find some slides (http://csdd.tufts.edu/files/uploads/Tufts_CSDD_briefing_on_R...) about it.

$1.2B of this reported cost is "opportunity cost", based on the fact that you could have taken the money you would've used for drug development and invested it elsewhere... at a 10.5% real rate of return. Which is a rather questionable assumption.

Practice epistemic self defense: go to the primary sources!

lumberjack2• 12 years ago

It's not that far off.

http://piketty.pse.ens.fr/files/capital21c/en/pdf/T12.2.pdf

jimrandomh2• 12 years ago

First result I came up with was http://www.thornburginvestments.com/pdfs/TH1401.pdf which states a 6% real rate of return on the S&P 500.

kaonashi2• 12 years ago

So the opportunity cost is not developing a drug and stuffing the money into a mattress. Sounds like a good trade-off.

jedmeyers• 12 years ago

Not a mattress, but investing it elsewhere.

RAB1138• 12 years ago

Relevant: Eroom's law: http://www.nature.com/nrd/journal/v11/n3/fig_tab/nrd3681_F1....

So what do we do here? We're not just underfunding basic biology research, it's rolling down hill and affecting the efficacy of our products oriented pharma R&D investments.

Best proposal I've heard to pull out of this trend? Computational biology: simulate different tissue types and organ systems (their dynamics, metabolic pathways, flow of matter/energy/information) and expose the simulated tissues to potential drugs in high-throughput simulations. Test exponentially more compounds and prune obvious failure from the chemical structure tree early and often. What you're left with is a restricted set of compounds to try synthesizing and taking to trial.

jjoonathan• 12 years ago

They've been doing that (and other comp bio techniques) for decades so it's already factored into the price. It's also a lot harder and less reliable than it sounds, unfortunately.

snlacks• 12 years ago

Costs are so high as these become more challenging, seems like Socialization with subsidy of incentive-based private funding (bonds, VCs) would be a better model.

bluthru• 12 years ago

In 2012, the pharmaceutical industry spent more than $27 billion on drug promotion— more than $24 billion on marketing to physicians and over $3 billion on advertising to consumers (mainly through television commercials). This approach is designed to promote drug companies' products by influencing doctors' prescribing practices.

http://www.pewtrusts.org/en/research-and-analysis/fact-sheet...

npsimons• 12 years ago

Exactly; not sure where I found it, so completely unreliable, but I once read that pharma companies advertising costs were something like 85+% of budget for a drug.

refurb• 12 years ago

Take a look at the graph in your link.

Almost 75% of that budget is on sales reps and free drugs. Having face-to-face conversations with physicians doesn't come cheap.

Also, don't forget that drug companies are only allowed to promote to FDA approved indications.

I don't see why drug companies advertising is such an issue. Despite what most people think, great drugs don't sell themselves.

vdaniuk• 12 years ago

Great drugs don't sell themselves only because the game as in game theory is set this way. If the incentives/punishment structure setup would be different, drug marketing in the US could be much more beneficial for the end user.

iandanforth• 12 years ago

drug companies are only allowed to promote to FDA approved indications.

Ever heard of Forteo? It's an osteoporosis drug and not one you want to find out you need. It's got some nasty side effects (like cancer) and is a pain to take (it's a daily injection.) Drug reps push it hard because it works in a novel fashion actually causing bone regrowth rather than slowing bone loss. That said the very very specific circumstances of who should be on it are almost never mentioned (in in person discussions, the FDA mandates the website mentions everything). It is talked about as a treatment for osteoporosis generally. It's talked about as a treatment to prevent fracture. Both of those are technically true, but the slope here is so slippery that the concept of 'approved indications' is like an open window to a fly. There's a lot of room to maneuver.

People are susceptible to advertising. Doctors are people. And when an attractive 26 year old in a tight skirt walks into your office to talk about writing just a few more prescriptions a month of something you already do, well that's going to have an impact.

The distinguishing factor here though is that the consumer is left out of the loop, the person who has to suffer the side effects is not part of the marketplace. This is not your standard free market exercise where caveat-emptor is an appropriate response. This is behind the scenes manipulation of people who are often trusted blindly by their patients.

I pay good money to have access to people with the experience and expertise to diagnose and treat my ailments. However if I find out that they are being asked to be invulnerable to cognitive errors like the recency fallacy then I'm screwed. It's unreasonable to ask people to be immune to manipulation and so the only reasonable course is to limit manipulation as much as possible.

eitally• 12 years ago

My wife works for a small pharmaceutical company and of there roughly 900 employees, about 550 are sales force. This is a profitable company that is currently valued at about $8B and does about $700m/yr revenue, but which doesn't do any consumer advertising whatsoever.

Thriptic• 12 years ago

Nature Reviews Drug Discovery published a good overview of the factors contributing to the high costs of drug development in 2010, along with some suggestions of how to mitigate cost increases. It's a good read for anyone interested in the subject.

http://www.nature.com/nrd/journal/v9/n3/abs/nrd3078.html

dprice1• 12 years ago

See also this (opinion) piece in the NY Times, which disputes this calculation: http://www.nytimes.com/2014/11/19/upshot/calculating-the-rea...

haberman• 12 years ago

Interesting, in the comments is a link to this Doctors Without Borders response, arguing that this figure is grossly overstated. They claim a number closer to $186M (taking into account cost of failures) http://www.doctorswithoutborders.org/article/rd-cost-estimat...

I don't know anything about this area, but would love to know whose figure is closer to right on this.

Alex3917• 12 years ago

The roadmap that MAPS has produced for getting FDA approval for MDMA shows that it will cost about 20M in total. I think the salary they're paying their own staff is probably unrealistically low for a for-profit, and they also had some of the pre-clinical work done for them. But at the same time they've incurred enormous costs due to the fact that MDMA is schedule I, so all in all this probably isn't a bad estimate for the actual cost of getting a new drug approved.

gwern2• 12 years ago

What a screed. I went to factcheck their first claim, on an Andrew Witty quote, and here's what I found: http://pipeline.corante.com/archives/2013/03/18/glaxosmithkl...

Oh, so it's only less than $1b if your drugs never fail in clinical trials. Well gee, it's a good thing everyone in the drug industry knows how to have a 100% approval rate!

I stopped there. It's pretty clear what level of thinking and intellectual honesty went into that rebuttal.

stuaxo• 12 years ago

Marketing is a pretty big part of the pie compared to R + D

http://www.twnside.org.sg/title/twr131n.htm

debacle• 12 years ago

This article is citing a study funded by the pharmaceutical industry.

austinlyons• 12 years ago

That's on the order of the cost to buid new Intel fab.

http://en.wikipedia.org/wiki/List_of_semiconductor_fabricati...

dnautics• 12 years ago

The $1.5 billion average cost is an average, and includes a lot of stupid ideas that should never have made it past the drawing board, but when you're a rich big pharma with tons of money to throw around, why not.

If you are smart (and quite lucky) it's an order of magnitude less.

http://www.forbes.com/sites/bernardmunos/2014/11/20/the-ugly...

gwern2• 12 years ago

Some positive discussion: http://pipeline.corante.com/archives/2014/11/24/the_cost_of_... http://lifescivc.com/2014/11/a-billion-here-a-billion-there-...

aaron6952• 12 years ago

Those are quite good articles.

artsrc• 12 years ago

LaMattina counters that pricing should be based not on R&D costs but on the value a drug delivers to patients.

I love this line. We should do it for oxygen. Your bill is pretty high because oxygen delivers a lot of value.

Pricing should be based on cost of provision. Because if it is higher in a market economy someone else can enter the market and provide at a lower cost.

Houshalter2• 12 years ago

The economics of drugs are different. The probability of two different labs inventing the exact same drug are pretty small. But when they do invent a drug they have a limited monopoly to make their money back. Which is a good thing, since it encourages more investment in drug development then there otherwise would be.

Cost to Develop New Pharmaceutical Drug Now Exceeds $2.5B?

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