Can­cer drugs: Cost hard to fig­ure

De­vel­op­ment out­lays less than pre­vi­ous fig­ures, study sug­gests.

The Atlanta Journal-Constitution - - BUSINESS - Gina Ko­lata

What does it re­ally cost to bring a drug to mar­ket?

The ques­tion is cen­tral to the de­bate over ris­ing health care costs and ap­pro­pri­ate drug pric­ing. Pres­i­dent Don­ald Trump cam­paigned on prom­ises to lower the costs of drugs.

But num­bers have been hard to come by. For years, the stan­dard fig­ure has been sup­plied by re­searchers at the Tufts Cen­ter for the Study of Drug De­vel­op­ment: $2.7 bil­lion each, in 2017 dol­lars.

Yet a new study look­ing at 10 can­cer med­i­ca­tions, among the most ex­pen­sive of new drugs, has ar­rived at a much lower fig­ure: a me­dian cost of $757 mil­lion per drug. (Half cost less, and half more.)

Fol­low­ing ap­proval, the 10 drugs to­gether brought in $67 bil­lion, the re­searchers also con­cluded — a more than sev­en­fold re­turn on in­vest­ment. Nine out of 10 com­pa­nies made money, but rev­enues var­ied enor­mously. One drug had not yet earned back its de­vel­op­ment costs.

The study, pub­lished last week in JAMA In­ter­nal Medicine, re­lied on com­pany fil­ings with the Se­cu­ri­ties and Ex­change Com­mis­sion to de­ter­mine re­search and de­vel­op­ment costs.

“It seems like they have done a thought­ful and rig­or­ous job,” said Dr. Aaron Kes­sel­heim, di­rec­tor of the pro­gram on reg­u­la­tion, ther­a­peu­tics and the law at Brigham and Women’s Hos­pi­tal.

“It pro­vides at least some­thing of a re­al­ity check,” he added.

The fig­ures were met with swift crit­i­cism, how­ever, by other ex­perts and by rep­re­sen­ta­tives of the biotech in­dus­try, who said that the re­search did not ad­e­quately take into ac­count the costs of the many ex­per­i­men­tal drugs that fail.

“It’s a bit like say­ing it’s a good busi­ness to go out and buy win­ning lot­tery tick­ets,” Daniel Seaton, a spokesman for the Biotech­nol­ogy In­no­va­tion Or­ga­ni­za­tion, said in an email.

Dr. Jerry Avorn, chief of the divi­sion of phar­ma­coepi­demi­ol­ogy and phar­ma­coeco­nomics at Brigham and Women’s Hos­pi­tal, pre­dicted that the pa­per would help fuel the de­bate over the prices of can­cer drugs, which have soared so high “that we are get­ting into ar­eas that are al­most unimag­in­able eco­nom­i­cally,” he said.

A leukemia treat­ment ap­proved re­cently by the Food and Drug Ad­min­is­tra­tion, for ex­am­ple, will cost $475,000 for a sin­gle treat­ment. It is the first of a wave of gene ther­apy treat­ments likely to carry stag­ger­ing price tags.

“This is an im­por­tant brick in the wall of this de­vel­op­ing con­cern,” he said.

Dr. Vi­nay Prasad, an on­col­o­gist at Ore­gon Health and Sci­ence Univer­sity, and Dr. Sham Mailankody, of Me­mo­rial Sloan Ket­ter­ing Can­cer Cen­ter, ar­rived at their fig­ures after re­view­ing data on 10 com­pa­nies that brought a can­cer drug to mar­ket in the past decade.

Since the com­pa­nies also were de­vel­op­ing other drugs that did not re­ceive ap­proval from the FDA, the re­searchers were able to in­clude the com­pa­nies’ to­tal spend­ing on re­search and de­vel­op­ment, not just what they spent on the drugs that suc­ceeded.

One strik­ing ex­am­ple was ibru­ti­nib, made by Phar­ma­cyclics. It was ap­proved in 2013 for pa­tients with cer­tain blood can­cers who did not re­spond to con­ven­tional ther­apy.

Ibru­ti­nib was the only drug out of four the com­pany was de­vel­op­ing to re­ceive FDA ap­proval. The com­pany’s re­search and de­vel­op­ment costs for their four drugs were $388 mil­lion, the com­pany’s SEC fil­ings in­di­cated.

After it was ap­proved, Janssen Biotech ac­quired the drug for $21 bil­lion. “That is a 50-fold dif­fer­ence be­tween rev­enue post-ap­proval and cost to de­velop,” Prasad said.

Ac­cu­rate fig­ures on drug de­vel­op­ment are dif­fi­cult to find and of­ten dis­puted. Although it is widely cited, the Tufts study also was fiercely crit­i­cized.

One ob­jec­tion was that the re­searchers, led by Joseph A. DiMasi, did not dis­close the com­pa­nies’ data on de­vel­op­ment costs. The study in­volved 10 large com­pa­nies, which were not named, and 106 in­ves­ti­ga­tional drugs, also not named.

But DiMasi found the new study “ir­re­deemably flawed at a fun­da­men­tal level.”

“The sam­ple con­sists of rel­a­tively small com­pa­nies that have got­ten only one drug ap­proved, with few other drugs of any type in de­vel­op­ment,” he said. The re­sult is “sub­stan­tial se­lec­tion bias,” mean­ing that the es­ti­mates do not ac­cu­rately reflect the in­dus­try as a whole.

Ninety-five per­cent of can­cer drugs that en­ter clin­i­cal tri­als fail, said Seaton, of the biotech in­dus­try group. “The small hand­ful of suc­cess­ful drugs — those looked at by this pa­per — must be prof­itable enough to fi­nance all of the many fail­ures this anal­y­sis leaves un­ex­am­ined.”

“When the rare event oc­curs that a com­pany does win ap­proval,” he added, “the re­ward must be com­men­su­rate with tak­ing on the mul­ti­ple lev­els of risk not seen in any other in­dus­try if drug de­vel­op­ment is to re­main eco­nom­i­cally vi­able for prospec­tive in­vestors.”

Can­cer drugs re­main among the most ex­pen­sive med­i­ca­tions, with prices reach­ing the hun­dreds of thou­sands of dol­lars per pa­tient.

Although the new study was small, its es­ti­mates are so much lower than pre­vi­ous fig­ures, and the re­turn on in­vest­ment so great, that ex­perts say they raise ques­tions about whether soar­ing drug prices re­ally are needed to en­cour­age in­vest­ment.

“That seems hard to swal­low when they make seven times what they in­vested in the first four years,” Prasad said.

The new study has lim­i­ta­tions, noted Pa­tri­cia Dan­zon, an econ­o­mist at the Univer­sity of Penn­syl­va­nia’s Whar­ton School.

It in­volved just 10 small biotech com­pa­nies whose can­cer drugs were aimed at lim­ited groups of pa­tients with less com­mon dis­eases.

For such drugs, the FDA of­ten per­mits clin­i­cal tri­als to be very small and some­times with­out con­trol groups.

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