Economics of new oncology drug development.

PURPOSE: Review existing studies and provide new results on the development, regulatory, and market aspects of new oncology drug development. METHODS: We utilized data from the US Food and Drug Administration (FDA), company surveys, and publicly available commercial business intelligence databases on new oncology drugs approved in the United States and on investigational oncology drugs to estimate average development and regulatory approval times, clinical approval success rates, first-in-class status, and global market diffusion. RESULTS: We found that approved new oncology drugs to have a disproportionately high share of FDA priority review ratings, of orphan drug designations at approval, and of drugs that were granted inclusion in at least one of the FDA's expedited access programs. US regulatory approval times were shorter, on average, for oncology drugs (0.5 years), but US clinical development times were longer on average (1.5 years). Clinical approval success rates were similar for oncology and other drugs, but proportionately more of the oncology failures reached expensive late-stage clinical testing before being abandoned. In relation to other drugs, new oncology drug approvals were more often first-in-class and diffused more widely across important international markets. CONCLUSION: The market success of oncology drugs has induced a substantial amount of investment in oncology drug development in the last decade or so. However, given the great need for further progress, the extent to which efforts to develop new oncology drugs will grow depends on future public-sector investment in basic research, developments in translational medicine, and regulatory reforms that advance drug-development science.

Economic return of clinical trials performed under the pediatric exclusivity program.

CONTEXT: In 1997, Congress authorized the US Food and Drug Administration (FDA) to grant 6-month extensions of marketing rights through the Pediatric Exclusivity Program if industry sponsors complete FDA-requested pediatric trials. The program has been praised for creating incentives for studies in children and has been criticized as a "windfall" to the innovator drug industry. This critique has been a substantial part of congressional debate on the program, which is due to expire in 2007. OBJECTIVE: To quantify the economic return to industry for completing pediatric exclusivity trials. DESIGN AND SETTING: A cohort study of programs conducted for pediatric exclusivity. Nine drugs that were granted pediatric exclusivity were selected. From the final study reports submitted to the FDA (2002-2004), key elements of the clinical trial design and study operations were obtained, and the cost of performing each study was estimated and converted into estimates of after-tax cash outflows. Three-year market sales were obtained and converted into estimates of after-tax cash inflows based on 6 months of additional market protection. Net economic return (cash inflows minus outflows) and net return-to-costs ratio (net economic return divided by cash outflows) for each product were then calculated. MAIN OUTCOME MEASURES: Net economic return and net return-to-cost ratio. RESULTS: The indications studied reflect a broad representation of the program: asthma, tumors, attention-deficit/hyperactivity disorder, hypertension, depression/generalized anxiety disorder, diabetes mellitus, gastroesophageal reflux, bacterial infection, and bone mineralization. The distribution of net economic return for 6 months of exclusivity varied substantially among products (net economic return ranged from -$8.9 million to $507.9 million and net return-to-cost ratio ranged from -0.68 to 73.63). CONCLUSIONS: The economic return for pediatric exclusivity is variable. As an incentive to complete much-needed clinical trials in children, pediatric exclusivity can generate lucrative returns or produce more modest returns on investment.

Progress in intra-articular therapy.

Diarthrodial joints are well suited to intra-articular injection, and the local delivery of therapeutics in this fashion brings several potential advantages to the treatment of a wide range of arthropathies. Possible benefits over systemic delivery include increased bioavailability, reduced systemic exposure, fewer adverse events, and lower total drug costs. Nevertheless, intra-articular therapy is challenging because of the rapid egress of injected materials from the joint space; this elimination is true of both small molecules, which exit via synovial capillaries, and of macromolecules, which are cleared by the lymphatic system. In general, soluble materials have an intra-articular dwell time measured only in hours. Corticosteroids and hyaluronate preparations constitute the mainstay of FDA-approved intra-articular therapeutics. Recombinant proteins, autologous blood products and analgesics have also found clinical use via intra-articular delivery. Several alternative approaches, such as local delivery of cell and gene therapy, as well as the use of microparticles, liposomes, and modified drugs, are in various stages of preclinical development.

The price of innovation: new estimates of drug development costs.

The research and development costs of 68 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per new drug is 403 million US dollars (2000 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 11% yields a total pre-approval cost estimate of 802 million US dollars (2000 dollars). When compared to the results of an earlier study with a similar methodology, total capitalized costs were shown to have increased at an annual rate of 7.4% above general price inflation.

R&D Costs and Returns to New Drug Development: A Review of the Evidence

© 2012 by Oxford University Press. All rights reserved.This article reviews the extensive literature on R&D costs and returns. The first section focuses on R&D costs and the various factors that have affected the trends in real R&D costs over time. The second section considers economic studies on the distribution of returns in pharmaceuticals for different cohorts of new drug introductions. It also reviews the use of these studies to analyze the impact of policy actions on R&D costs and returns. The final section concludes and discusses open questions for further research.

Spending on postapproval drug safety.

Withdrawals of high-profile pharmaceuticals have focused attention on post-approval safety surveillance. There have been no systematic assessments of spending on postapproval safety. We surveyed drug manufacturers regarding safety efforts. Mean spending on postapproval safety per company in 2003 was 56 million dollars (0.3 percent of sales). Assuming a constant safety-to-sales ratio, we estimated that total spending on postapproval safety by the top twenty drug manufacturers was 800 million dollars in 2003. We also examined, using regression analysis, the relationship between the number of safety personnel and the number of initial adverse-event reports. This study offers information for the debate on proposed changes to safety surveillance.

Returns to R&D on new drug introductions in the 1980s.

This study finds that the mean IRR for 1980-84 U.S. new drug introductions is 11.1%, and the mean NPV is 22 million (1990 dollars). The distribution of returns is highly skewed. The results are robust to plausible changes in the baseline assumptions. Our work is also compared with a 1993 study by the OTA. Despite some important differences in assumptions, both studies imply that returns for the average NCE are within one percentage point of the industry's cost of capital. This is much less than what is typically observed in analyses based on accounting data.

Innovation in the pharmaceutical industry: New estimates of R&D costs.

The research and development costs of 106 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug and biologics development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per approved new compound is $1395 million (2013 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 10.5% yields a total pre-approval cost estimate of $2558 million (2013 dollars). When compared to the results of the previous study in this series, total capitalized costs were shown to have increased at an annual rate of 8.5% above general price inflation. Adding an estimate of post-approval R&D costs increases the cost estimate to $2870 million (2013 dollars).

Evaluating intra-articular drug delivery for the treatment of osteoarthritis in a rat model.

Osteoarthritis (OA) is a degenerative joint disease that can result in joint pain, loss of joint function, and deleterious effects on activity levels and lifestyle habits. Current therapies for OA are largely aimed at symptomatic relief and may have limited effects on the underlying cascade of joint degradation. Local drug delivery strategies may provide for the development of more successful OA treatment outcomes that have potential to reduce local joint inflammation, reduce joint destruction, offer pain relief, and restore patient activity levels and joint function. As increasing interest turns toward intra-articular drug delivery routes, parallel interest has emerged in evaluating drug biodistribution, safety, and efficacy in preclinical models. Rodent models provide major advantages for the development of drug delivery strategies, chiefly because of lower cost, successful replication of human OA-like characteristics, rapid disease development, and small joint volumes that enable use of lower total drug amounts during protocol development. These models, however, also offer the potential to investigate the therapeutic effects of local drug therapy on animal behavior, including pain sensitivity thresholds and locomotion characteristics. Herein, we describe a translational paradigm for the evaluation of an intra-articular drug delivery strategy in a rat OA model. This model, a rat interleukin-1beta overexpression model, offers the ability to evaluate anti-interleukin-1 therapeutics for drug biodistribution, activity, and safety as well as the therapeutic relief of disease symptoms. Once the action against interleukin-1 is confirmed in vivo, the newly developed anti-inflammatory drug can be evaluated for evidence of disease-modifying effects in more complex preclinical models.

"Call for prices": Strategic implications of raising consumers' costs

Many consumer durable retailers often do not advertise their prices and instead ask consumers to call them for prices. It is easy to see that this practice increases the consumers' cost of learning the prices of products they are considering, yet firms commonly use such practices. Not advertising prices may reduce the firm's advertising costs, but the strategic effects of doing so are not clear. Our objective is to examine the strategic effects of this practice. In particular, how does making price discovery more difficult for consumers affect competing retailers' price, service decisions, and profits? We develop a model in which a manufacturer sells its product through a high-service retailer and a low-service retailer. Consumers can purchase the retail service at the high-end retailer and purchase the product at the competing low-end retailer. Therefore, the high-end retailer faces a free-riding problem. A retailer first chooses its optimal service levels. Then, it chooses its optimal price levels. Finally, a retailer decides whether to advertise its prices. The model results in four structures: (1) both retailers advertise prices, (2) only the low-service retailer advertises price, (3) only the high-service retailer advertises price, and (4) neither retailer advertises price. We find that when a retailer does not advertise its price and makes price discovery more difficult for consumers, the competition between the retailers is less intense. However, the retailer is forced to charge a lower price. In addition, if the competing retailer does advertise its prices, then the competing retailer enjoys higher profit margins. We identify conditions under which each of the above four structures is an equilibrium and show that a low-service retailer not advertising its price is a more likely outcome than a high-service retailer doing so. We then solve the manufacturer's problem and find that there are several instances when a retailer's advertising decisions are different from what the manufacturer would want. We describe the nature of this channel coordination problem and identify some solutions. © 2010 INFORMS.

PKC signaling regulates drug resistance of the fungal pathogen Candida albicans via circuitry comprised of Mkc1, calcineurin, and Hsp90.

Fungal pathogens exploit diverse mechanisms to survive exposure to antifungal drugs. This poses concern given the limited number of clinically useful antifungals and the growing population of immunocompromised individuals vulnerable to life-threatening fungal infection. To identify molecules that abrogate resistance to the most widely deployed class of antifungals, the azoles, we conducted a screen of 1,280 pharmacologically active compounds. Three out of seven hits that abolished azole resistance of a resistant mutant of the model yeast Saccharomyces cerevisiae and a clinical isolate of the leading human fungal pathogen Candida albicans were inhibitors of protein kinase C (PKC), which regulates cell wall integrity during growth, morphogenesis, and response to cell wall stress. Pharmacological or genetic impairment of Pkc1 conferred hypersensitivity to multiple drugs that target synthesis of the key cell membrane sterol ergosterol, including azoles, allylamines, and morpholines. Pkc1 enabled survival of cell membrane stress at least in part via the mitogen activated protein kinase (MAPK) cascade in both species, though through distinct downstream effectors. Strikingly, inhibition of Pkc1 phenocopied inhibition of the molecular chaperone Hsp90 or its client protein calcineurin. PKC signaling was required for calcineurin activation in response to drug exposure in S. cerevisiae. In contrast, Pkc1 and calcineurin independently regulate drug resistance via a common target in C. albicans. We identified an additional level of regulatory control in the C. albicans circuitry linking PKC signaling, Hsp90, and calcineurin as genetic reduction of Hsp90 led to depletion of the terminal MAPK, Mkc1. Deletion of C. albicans PKC1 rendered fungistatic ergosterol biosynthesis inhibitors fungicidal and attenuated virulence in a murine model of systemic candidiasis. This work establishes a new role for PKC signaling in drug resistance, novel circuitry through which Hsp90 regulates drug resistance, and that targeting stress response signaling provides a promising strategy for treating life-threatening fungal infections.

Impact of economic, regulatory, and patent policies on innovation in cancer chemoprevention.

Chemoprevention agents are an emerging new scientific area that holds out the promise of delaying or avoiding a number of common cancers. These new agents face significant scientific, regulatory, and economic barriers, however, which have limited investment in their research and development (R&D). These barriers include above-average clinical trial scales, lengthy time frames between discovery and Food and Drug Administration approval, liability risks (because they are given to healthy individuals), and a growing funding gap for early-stage candidates. The longer time frames and risks associated with chemoprevention also cause exclusivity time on core patents to be limited or subject to significant uncertainties. We conclude that chemoprevention uniquely challenges the structure of incentives embodied in the economic, regulatory, and patent policies for the biopharmaceutical industry. Many of these policy issues are illustrated by the recently Food and Drug Administration-approved preventive agents Gardasil and raloxifene. Our recommendations to increase R&D investment in chemoprevention agents include (a) increased data exclusivity times on new biological and chemical drugs to compensate for longer gestation periods and increasing R&D costs; chemoprevention is at the far end of the distribution in this regard; (b) policies such as early-stage research grants and clinical development tax credits targeted specifically to chemoprevention agents (these are policies that have been very successful in increasing R&D investment for orphan drugs); and (c) a no-fault liability insurance program like that currently in place for children's vaccines.

Cost of innovation in the pharmaceutical industry.

The research and development costs of 93 randomly selected new chemical entities (NCEs) were obtained from a survey of 12 U.S.-owned pharmaceutical firms. These data were used to estimate the pre-tax average cost of new drug development. The costs of abandoned NCEs were linked to the costs of NCEs that obtained marketing approval. For base case parameter values, the estimated out-of-pocket cost per approved NCE is $114 million (1987 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a 9% discount rate yielded an average cost estimate of $231 million (1987 dollars).

The cost of biopharmaceutical R&D: Is biotech different?

The costs of developing the types of new drugs that have been pursued by traditional pharmaceutical firms have been estimated in a number of studies. However, similar analyses have not been published on the costs of developing the types of molecules on which biotech firms have focused. This study represents a first attempt to get a sense for the magnitude of the R&D costs associated with the discovery and development of new therapeutic biopharmaceuticals (specifically, recombinant proteins and monoclonal antibodies [mAbs]). We utilize drug-specific data on cash outlays, development times, and success in obtaining regulatory marketing approval to estimate the average pre-tax R&D resource cost for biopharmaceuticals up to the point of initial US marketing approval (in year 2005 dollars). We found average out-of-pocket (cash outlay) cost estimates per approved biopharmaceutical of $198 million, $361 million, and $559 million for the preclinical period, the clinical period, and in total, respectively. Including the time costs associated with biopharmaceutical R&D, we found average capitalized cost estimates per approved biopharmaceutical of $615 million, $626 million, and $1241 million for the preclinical period, the clinical period, and in total, respectively. Adjusting previously published estimates of R&D costs for traditional pharmaceutical firms by using past growth rates for pharmaceutical company costs to correspond to the more recent period to which our biopharmaceutical data apply, we found that total out-of-pocket cost per approved biopharmaceutical was somewhat lower than for the pharmaceutical company data ($559 million vs $672 million). However, estimated total capitalized cost per approved new molecule was nearly the same for biopharmaceuticals as for the adjusted pharmaceutical company data ($1241 million versus $1318 million). The results should be viewed with some caution for now given a limited number of biopharmaceutical molecules with data on cash outlays, different therapeutic class distributions for biopharmaceuticals and for pharmaceutical company drugs, and uncertainty about whether recent growth rates in pharmaceutical company costs are different from immediate past growth rates. Copyright © 2007 John Wiley & Sons, Ltd.