Do big R&D bud­gets jus­ti­fy US pre­mi­um drug prices? No way, an­a­lysts scoff

Do you want a new for­mu­la for cal­cu­lat­ing “ex­cess” prices paid for brand­ed drug prices? A group of health­care re­searchers found a ripe prospect: Tack­ling the pre­mi­um built in­to US drug costs.

Big Phar­ma R&D is a game of block­busters. Find­ing one, get­ting one ap­proved and then build­ing the mar­ket is a multi­bil­lion-dol­lar quest. And there’s been con­sid­er­able fo­cus on the US pre­mi­um, the ex­tra that big bio­phar­ma col­lects in this coun­try while sell­ing the same drugs in tight­ly con­trolled sin­gle-pay­er mar­kets in Eu­rope for much, much less.

That US pre­mi­um, the com­pa­nies of­ten in­sist, is es­sen­tial to ac­com­mo­date huge R&D bud­gets re­quired to cov­er the bil­lions in av­er­age costs for new drug de­vel­op­ment, what Pres­i­dent Trump and oth­ers re­fer to as a huge sub­sidy that this coun­try pays to help oth­er coun­tries who won’t share the load of in­no­va­tion.

Writ­ing in Health Af­fairs, though, a trio of in­ves­ti­ga­tors says the ar­gu­ment is bunk. They crunched the num­bers on the list ex-US price against the av­er­age net in the US, us­ing VA and Med­ic­aid dis­counts to try and achieve a clear­er pic­ture of the bot­tom line for man­u­fac­tur­ers. And they found that the US pre­mi­um paid for the top 20 drugs on the mar­ket far ex­ceeds the to­tal amount the same 15 com­pa­nies spent on their glob­al R&D bud­gets.

That pre­mi­um, they say, nets 15 com­pa­nies $116 bil­lion in ex­tra an­nu­al rev­enue, com­pared to $76 bil­lion in to­tal re­search spend­ing. And 3 com­pa­nies earn more in pre­mi­um pric­ing for one prod­uct than they spend on re­search each year: Ab­b­Vie — Hu­mi­ra, Bio­gen — Tec­fidera; and Te­va – Co­pax­one.


Nan­cy Yu, Zachary Helms and Pe­ter Bach — fi­nan­cial an­a­lysts at the Cen­ter for Health Pol­i­cy and Out­comes at Memo­r­i­al Sloan Ket­ter­ing Can­cer Cen­ter — write:

We found that the pre­mi­ums phar­ma­ceu­ti­cal com­pa­nies earn from charg­ing sub­stan­tial­ly high­er prices for their med­ica­tions in the US com­pared to oth­er West­ern coun­tries gen­er­ates sub­stan­tial­ly more than the com­pa­nies spend glob­al­ly on their re­search and de­vel­op­ment. This find­ing coun­ters the claim that the high­er prices paid by US pa­tients and tax­pay­ers are nec­es­sary to fund re­search and de­vel­op­ment. Rather, there are bil­lions of dol­lars left over even af­ter world­wide re­search bud­gets are cov­ered.

If you take out the pre­mi­um US pay­ers cov­er for these drugs rel­a­tive to R&D spend­ing, you could save $40 bil­lion off of the to­tal $325 bil­lion paid for drugs in 2015.

Don’t look for any rapid adop­tion in the US, though. These com­pa­nies aren’t in the busi­ness of cov­er­ing costs, and bleed­ing prof­its isn’t on the agen­da in Wash­ing­ton DC. Trump’s fo­cus, to the ex­tent we un­der­stand it so far, is to make drug de­vel­op­ment sim­pler, with few­er reg­u­la­to­ry re­quire­ments and there­by less ex­pen­sive, of­fer­ing a route to low­er costs. This new piece un­der­scores, though, that there is no di­rect re­la­tion­ship be­tween re­search spend­ing and block­buster drug prices.

The sto­ry trig­gered an in­ter­est­ing round of com­ments on Twit­ter this morn­ing.

“If the ar­gu­ment is disin­gen­u­ous figleaf­ing for mo­nop­oly pric­ing be­hav­ior, it has now al­so been fal­si­fied,” Bach re­spond­ed to crit­i­cism of his piece.




Lessons for biotech and phar­ma from a doc­tor who chased his own cure

After being struck by a rare disease as a healthy third year medical student, David Fajgenbaum began an arduous journey chasing his own cure. Amidst the hustle of this year’s JP Morgan conference, the digital trials platform Medable partnered with Endpoints Studio to share Dr. Fajgenbaum’s story with the drug development industry.

What follows is an edited transcript of the conversation between Medable CEO Dr. Michelle Longmire and Dr. Fajgenbaum, and it is full of lessons for biotech executives charged with bringing the next generation of medicines to patients.

James Collins, Broad Institute via Youtube

UP­DAT­ED: A space odyssey for new an­tibi­otics: MIT's ma­chine learn­ing ap­proach

Drug development is complex, expensive and comes with lousy odds of success — but in most cases, if you make it across the finish line brandishing a product with an edge (and play your cards right) it can be a lucrative endeavor.

As it stands, the antibiotic market is cursed — it harbors the stink of multiple bankruptcies, a dearth of innovation, and is consequently barely whetting the voracious appetites of big pharma or venture capitalists. Enter artificial intelligence — the biopharma industry’s cure-all for the pesky process of making a therapeutic, including data mining, drug discovery, optimal drug delivery, and addressable patient population.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 72,800+ biopharma pros reading Endpoints daily — and it's free.

Gilead los­es two more patent chal­lenges on HIV pill, set­ting up court­room fight in Delaware

Gilead sustained two more losses in their efforts to rid themselves of an activist-backed patent lawsuit from the US government over a best-selling HIV pill.

Urged on by activists seeking to divert a portion of Gilead’s revenue to clinics and prevention programs, the Department of Health and Human Services made a claim to some of the patents for the best-selling HIV prevention drug, Truvada, also known as PrEP. Gilead responded by arguing in court that HHS’s patents were invalid.

Today, the US Patent and Trademark Office ruled that Gilead was likely to lose the last two of those challenges as well. The USPTO ruled against Gilead on the first two patents earlier this month.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 72,800+ biopharma pros reading Endpoints daily — and it's free.

Jim Scholefield via PR Newswire

Mer­ck los­es its chief dig­i­tal of­fi­cer, spot­light­ing tal­ent hunt for the hottest ti­tle in Big Phar­ma

Over the last few years we’ve seen the chief digital officer title become one of the hottest commodities in Big Pharma as global organizations hunt the best talent to sharpen the cutting edge of their tech platforms.

But Merck just discovered how hard it may be to keep them focused on pharma.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 72,800+ biopharma pros reading Endpoints daily — and it's free.

Kathy High (file photo)

Gene ther­a­py pi­o­neer Kathy High has left Spark af­ter com­plet­ing $4.3B union with Roche

Kathy High dedicated the past seven years of her life shepherding experimental gene therapies she’s developed at Children’s Hospital of Philadelphia toward the market as president and head of R&D at Spark Therapeutics. Now that the biotech startup is fully absorbed into Roche — with an FDA approval, a $4.3 billion buyout and a promising hemophilia program to boast — she’s ready to move on.

Roche confirmed her departure with Endpoints News and noted “she will take some well-deserved time off and then will begin a new chapter in a sabbatical at a university.”

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 72,800+ biopharma pros reading Endpoints daily — and it's free.

Bank­rupt an­tibi­otics mak­er Ar­a­digm turns to old part­ner/in­vestor for fi­nal $3M fire sale

Grifols once paid Aradigm $26 million for a stake in its inhaled antibiotics. But with Aradigm now in bankruptcy, the Spanish drugmaker is dishing out a final $3.2 million to buy it all.

The fire sale — which comes one year after Aradigm filed for Chapter 11 following a regulatory trifecta for disaster — will see Grifols obtain assets and IP to Apulmiq (formerly Pulmaquin and Linhaliq in Europe), Lipoquin and free ciprofloxacin. In addition to waiving its claims in the bankruptcy case, Grifols also agreed to milestone payments up to $3 million more upon any regulatory approvals.

DB­V's peanut pre­ven­tion patch ap­proach­es key stage of ap­proval process

Almost a year and a half after DBV Technologies pulled its peanut allergy immunotherapy patch from FDA review, the biotech will get their day in court. The FDA has scheduled an advisory committee hearing for May 15.

In the two-horse race to develop the first immunotherapy for peanut allergy, DBV had the early lead, filing an NDA for their patch in 2018. But on December 20 of that year, the company withdrew their application after, they said, meeting with regulators and determining they had not submitted “sufficient detail regarding data on manufacturing procedures and quality controls.” Aimmune filed their BLA 3 days later and won approval as the first immunotherapy for peanuts this month.

Tal Zaks (Moderna via YouTube)

For two decades, a new vac­cine tech­nol­o­gy has been slow­ly ap­proach­ing prime time. Now, can it stop a pan­dem­ic?

Two months before the outbreak, Moderna CMO Tal Zaks traveled from Cambridge, MA to Washington DC to meet with Anthony Fauci and the leaders of the National Institutes of Health.

For two years, Moderna had worked closely with NIH researchers to build a new kind of vaccine for MERS, one of the deadliest new viruses to emerge in the 21st century. The program was one test for a new technology designed to be faster, cheaper and more precise than the ways vaccines had been made for over a century. They had gathered evidence the technology could work in principle, and Fauci, the longtime head of the National Institute of Allergy and Infectious Diseases and a longtime advocate for better epidemic preparedness, wanted to see if it, along with a couple of other approaches, could work in a worst-case scenario: A pandemic.

“[We were] trying to find a test case for how to demonstrate if our technology could rapidly prepare,” Zaks told Endpoints News.

Zaks and Fauci, of course, wouldn’t have to wait to develop a new test. By year’s end, an outbreak in China would short circuit the need for one and throw them into 24/7 work on a real-world emergency. They also weren’t the only ones with new technology who saw a chance to help in a crisis.

An ocean away, Lidia Oostvogels was still on vacation and relaxing at her mother’s house in Belgium when her Facebook started changing. It was days after Christmas and on most people’s feeds, the news that China had reported a novel virus to the World Health Organization blurred into the stream of holiday sweaters and fir trees. But on Oostvogels’s feed, full of vaccine researchers and virus experts, speculation boiled: There was a virus in China, something contained to the country, but “exotic,” “weird,” and maybe having to do with animals. Maybe a coronavirus.

Lidia Oostvogels

“I was immediately thinking like, ‘Hey, this is something that if needed, we can play a role,'” Oostvogels told Endpoints.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 72,800+ biopharma pros reading Endpoints daily — and it's free.

An­to­nio Gual­ber­to starts post-Ku­ra ca­reer at Ei­sai sub­sidiary H3; eF­FEC­TOR co-founder Siegfried Re­ich jumps to Turn­ing Point

→ Days after Kura Oncology announced the departure of co-founder Antonio Gualberto, we finally know where he wound up. Eisai subsidiary H3 Biomedicine has recruited him as CMO to finding the right patients to its four clinical-stage small molecule assets hitting genomic drivers of cancer.

“Challenges of these and many other precision medicine approaches are on one hand technical — a need for robust and precise diagnostics — and on the other hand derived by the challenge to alter standard clinical practice in settings where patient screening, e.g. by tumor DNA sequencing, is not standard practice,” he wrote to Endpoints News on his way back to Boston from Eisai’s Tokyo offices. “Only compelling clinical activity can drive clinicians and pathologists to modify standard clinical practice.”