Drug Development, R&D

Are drug R&D costs exaggerated for effect? Researchers peg the median price of pivotal success at an economical $19M

One of the most frequently cited stats in the biotech biz revolves around the claim that it can take more than a decade and $1 billion-plus to get a drug to market. For lobbyists, it’s a chance to underscore the high cost of R&D that goes into a new treatment — and help consumers and payers swallow the bitter pill that comes with big prices attached to the therapies that pass muster at the FDA.

But does it accurately represent the true cost of R&D today?

One set of researchers decided to take a telling snapshot of one key metric in drug development, and you might be surprised to learn what they found.

Joseph Ross

Publishing in JAMA Internal Medicine, the group sized up the 138 pivotal trials that were needed to get an approval on 59 novel drugs approved in 2015 and 2016. They used a global clinical trial cost assessment tool used by CROs and pharmas to make their estimates. 

The median estimated cost of the full range of studies: $19 million.

The spread started at a low of $5 million for some very small studies testing drugs for very rare diseases — with no control group — and soared to $346.8 million for a non-inferiority study. Of the 138 total, 26 were uncontrolled, which is definitely cheaper. The mean estimated cost of those uncontrolled studies was $13.5 million compared to $35.1 million for a placebo control or rival drug in the mix.

The mantra in the biotech industry in particular — where you’ll find the smallest R&D budgets — has been smaller, faster, cheaper when it comes to studies. And that mantra may be playing out in new trial designs that are squeezing the cost of clinical trials, particularly for truly novel drugs.

The authors say the numbers provide “a different perspective to the widely held assumption that elaborate and expensive clinical trials are the main reason for the high costs of developing a new drug.”

In a commentary, Yale’s Joseph Ross cautioned against considering the study a guide to development costs, as it’s restricted to the successful pivotal trials. He adds:

(I)t suggests that the stronger the evidence that is generated, which is most useful to inform clinical practice, the more it costs. We get what we pay for, and high quality clinical trial data are well worth the investment to make sure we prioritize spending our healthcare resources on therapies that have been shown to benefit patients.

PhRMA took a look at these numbers, though, and immediately bristled at the implications. The study, says a spokesperson, ignores the full range of costs that go into developing a new drug, from preclinical through approval. And what about all the failures companies have to endure along the way? That adds enormously to the cost of drug development, says a spokesperson.

This study’s narrow findings should not be used to make sweeping generalizations about the investment biopharmaceutical companies make in the development of new therapies. The study ignores the majority of costs related to the research and development (R&D) of a new medicine, ranging from extensive pre-clinical research, clinical trials, global coordination of clinical trials, development of manufacturing methods and multiple other aspects of development, suggesting a narrow view of the R&D process and risk companies face at the outset of an uncertain project.

More fundamentally, the study excludes the significant cost associated with unsuccessful drug candidates and trials. Developing innovative new medicines is a long and complex process fraught with more setbacks than successes. Less than 12 percent of medicines entering a phase one clinical trial will ultimately be approved for use by patients. Setbacks are an inevitable part of the R&D process, and they must be factored into the cost of discovering new medicines.

Maybe the moral to this story is that failure is pricey, but late-stage success can be relatively cheap. And that puts a different spin on the big values we’ve been seeing for experimental drugs with some human data to back them up.

 


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Biotech Investment Analyst
SV Health Investors Boston, MA
Research Scientist - Disease Biology
Recursion Pharmaceuticals Salt Lake City, UT
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Recursion Pharmaceuticals Salt Lake City, UT
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Cadent Therapeutics Cambridge, MA
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twoXAR Mountain View, CA

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