The cost of developing pharmaceuticals: crafty figures
The shocking price of inventing new drugs
SPFO based on Forbes materials: Matthew Herper, The Truly Staggering Cost Of Inventing New DrugsDuring the Super Bowl game (National Football League (NFL) title game)
The United States of America. – Ed.) a representative of the pharmaceutical company Eli Lilly wrote in their corporate blog that the introduction of a new drug to the market costs 1.3 billion US dollars. This amount would have paid for 371 Super Bowl commercials, 16 million official National Football League games, two stadiums for professional American football, the maintenance of virtually all NFL players and every seat in every league stadium for six weeks in a row. Of course, this is a joke.
On average, the cost of developing one drug by a large pharmaceutical company ranges from 4 to 11 billion US dollars.
The pharmaceutical industry has been rolling in billions of numbers for a long time, as follows from a study approved by pharmaceutical companies by Joseph Di Masi from Tufts University. One billion US dollars is a convenient figure for pharmaceuticals, since it seems to justify the idea that medicines should be expensive (and may become more expensive, costing tens of thousands of dollars per patient per year), and prevents one from suspecting that such an expensive enterprise as the invention of new drugs may eventually turn out to be useless.
However, as Bernard Munos of the InnoThink Biomedical Innovation Research Center notes, the result of comparing the cost estimate with the failure rate is $4 billion in research spent on each drug being tested. But Munos also showed me another figure he got from dividing the research budget of each pharmaceutical company by the number of approved medicines. She is much more impressive.
For greater accuracy, Forbes (that is, Scott De Carlo and I) took the number of drug trials of large pharmaceutical corporations calculated by Munos and correlated them with their research expenses stated in reports over the past fifteen years according to the Thomson Reuters and FactSet databases. For all figures, we took into account inflation. When using data on approved medicines and research budgets since 1997, distortions are visible in certain short periods of time when one or another indicator has changed significantly.
The level of costs is staggering. AstraZeneca spent $12 billion on each new drug – as much as the annual sales volume of the best-selling medicine can make up; similar expenses of Amgen amounted to only $3.7 billion. With 12 billion dollars per drug, the invention of drugs does not look like a very reliable business. With 3.7 billion, you will be able to make money (perhaps a new drug will generate income for ten years; develop one drug a year, and everything will be fine).
There are a lot of expenses. One clinical trial may end up costing US$ 100 million, and the combined cost of manufacturing and clinical trials of some drugs may reach US$ 1 billion. But the main expense item is failures. AstraZeneca is doing poorly with this, because it has brought so few new drugs to the market. Eli Lilly's research costs are about the same, but over a fifteen-year period they have tested twice as many drugs, and the cost of one as a result is $ 4.5 billion.
Why put failures in the cost? At the moment, less than 1 drug out of 10 succeeds in human clinical trials. Some biotech companies manage to enter the market without spending money on unsuccessful drugs, but only because trials of other developments fail.
Last year, Biosociety magazine proposed to abandon the figure of $1 billion in calculations, because it concluded that pharmaceutical companies actually spent only $ 55 million on each new drug. Slate magazine supported this reduction to 55 million. This accounts for about a third of the development costs of almost the cheapest drug I found in the reports – the new antibiotic Dificid from Optimer against drug-resistant bacteria with Astriduim difficile. Have the total costs dropped? 175 million US dollars for a product, from sales of which 24 million US dollars were received in the first five months. If it's really just about taxes and accounting games, I think that explains how biotech companies manage to spend all their cash so often.
The high cost of drug development should not be a sign of personal dignity for pharmaceutical companies; there is no reason for it to be so high. Justifying the high cost of medicines with large research costs has always been a ploy on the part of the pharmaceutical industry. Expensive does not mean good. In addition, although the price of many medicines is overstated, but this is only a small part of the problem of the total cost of our health. Medicines are just easier to make a scapegoat, because their prices are visible.
However, if a pharmaceutical company could promise to develop new drugs at $55 million apiece, its stock price would soar like Apple's. Indeed, it costs billions of dollars to invent new drugs for heart disease, cancer or diabetes. The reality is that the pharmaceutical business is forced to increase the percentage of failures and their costs. We can only hope that new technologies and the improvement of knowledge in the field of biology will be able to change something.
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19.03.2012