FDA commissioner: We need to talk about drug development costs

New FDA Commissioner Scott Gottlieb wants to target drug development costs as yet another study asks how much it really costs to make a medicine.

Speaking at the RAPS Regulatory Convergence conference yesterday, Gottlieb focused much of his speech on driving efficiencies into the biomedical R&D model and thinking about the traditional three phases of trials.

“To address these issues, our Center for Drug Evaluation and Research, under the leadership of Janet Woodcock, is taking steps to modernize its Office of New Drugs,” he said. “The goal is to make sure that our workflows and policies are rooted in the best science and management principles, and that our staff has the support and tools they need to fully achieve their public health mission. I plan to talk more about some of these steps, later this month, at the National Press Club.

“I’ll also advance a Strategic Policy Roadmap that will detail additional steps we’re pursuing. These, and similar, efforts are aimed, in part, at making sure that FDA is able to adopt the modern scientific tools we need to maintain the rigor of our programs.

“We need to make sure that our approach to regulation is efficient, and doesn’t become an obstacle to the translation of scientific discoveries into practical solutions for patients. We need to make sure that we’re using the best science so we maintain our gold standard for determining safety and benefit.”

He said one way of cutting down on costs and time is the use of combined-phase studies, or what’s referred to as seamless trials, which are increasingly being used in cancer tests.

“Instead of conducting the usual three phases of study, seamless trials encompass one adaptive study where the phases are separated by interim looks. By using one large, continuous trial, it saves time and reduces costs. It also reduces the number of patients that have to be enrolled in a trial.”

Under Rick Pazdur, the FDA’s Oncology Center of Excellence is “taking steps to better evaluate and cultivate these new approaches as one part of our ongoing efforts to modernize our approaches,” Gottlieb said.

The agency is also working on the use of ‘Master Protocols’ to allow for greater coordinated ways to use the same trial structure to evaluate treatments in more than one subtype of a disease or type of patient.

FDA also wants to modernize, via advanced computing tools, how sponsors can evaluate clinical information, as well as predictive algorithms, and plans to begin work on at least ten new disease-specific guidance documents over the next year. Some of these documents are already underway, and among the diseases it’s targeting include Amyotrophic Lateral Sclerosis (ALS).

He also warned the industry that “by front-loading the cost of drug discovery, the broader biomedical community is making it harder to advance new ideas. It’s economically harder to capitalize the cost of an early stage drug program, relative to funding a later stage project. So, front-loading the costs are a recipe for reducing the amount of new ideas that can be advanced.”

And of course, by lowering R&D costs, this could also be translated into lower overall prescription-medicine price tags in the U.S., which typically pays the highest amount globally for new drugs, especially for the latest cancer meds. 

“We need to do these things to make sure we’re providing an efficient path for the translation of cutting-edge science into practical treatments that are going to benefit patients,” he said. “We need to do these things because the rising cost of drug development is unsustainable.”

“Unless we find ways to modernize how we approach our work, and make more efficient use of our resources, then we’re going to get fewer medicines, and higher costs.”

R&D development costs

At the same time, a new study was posted and hotly debated across the Bio-Twitter sphere, suggesting that the true cost of developing a new oncology medicine to market is around $650 million—far lower than the several billions often cited by the industry.

Last year, Joseph DiMasi, an associate professor and director of economic analysis at Tufts, co-authored a paper saying it now costs $2.87 billion (in 2013 dollars) for a biopharma company to research and sell a new drug. This was more than double the amount he claimed it cost back in 2007 when he co-wrote a paper suggesting it was $1.2 billion (in 2005 dollars).

RELATED: Harvard, Tufts med students stage protest at 'biased' $2.9B drug development figure

In the U.K., the pharma trade group ABPI believes the figure to be around $1.6 billion per new drug, given the higher rates of failure seen in later-stage trials of riskier medicines over the past decade, which is adding to the overall cost of bringing a drug to market.

And the U.S. trade group PhRMA released its latest figures in 2015, suggesting the cost was in fact $2.6 billion on average.

This latest study, published in the JAMA Internal Medicine journal by oncologist and Bio-Twitter regular Vinay Prasad, M.D., MPH, used SEC filings and specifically focusing on cancer—namely 10 oncology drugs—found that “the median cost of developing a single cancer drug was $648 million,” over a 9-year period from 2006 to 2015. It also found that the median revenue after approval for such a drug was $1.6 billion.

Many on Bio-Twitter however pointed out that this study did not take into account enough drugs, or failures, which really rack up the costs and push total spent into the billions when looking across a pipeline.

Back in 2013, Matthew Herper from Forbes looked at nearly 100 companies, and found that, when adding in failures, which occur in 95% of human studies, the overall cost per medicine was in fact closer to $5 billion.

In an industry built on trial and error, and at a time when companies are having to take bigger risks in R&D to get drugs to market, the argument is that the price tags and ROI have to take into account the broader costs of failure, as well as the single, direct cost of R&D per successful med.

Gottlieb said in his RAPS speech that “some drug programs can easily top $1 billion, just in direct outlays. We also know that the average cost of developing a single new drug continues to increase at a pace that often dwarfs even the rate of increases in other healthcare costs.

“Take just one time period, between 2003 and 2013, and one estimate of these costs. Over that time period, the cost of developing a drug rose by 145% after correcting for inflation, according to the Tufts Center for the Study of Drug Development.”

He added that, when drugs succeed, "they’re ultimately priced in a way that reflects a lot of factors, including their value to patients. But on some level, the prices also reflect some measure of the high development costs, and in particular, the cost of the capital that it took to develop them.

“At a time when people are rightly worried about the rising prices of drugs, and the impact on patient access, we also need to be thinking about these factors that contribute to the high cost of making new medicines," he said. 

“It’s also the case that drug development doesn’t stop with drug approval. We can and should learn a lot more about how treatments work in actual patients in real world settings, so that patients and payers are getting the highest possible value for their money.”