In the JournalsPerspective

Cancer drug revenue substantially higher than R&D spending

Revenue from cancer drugs after their FDA approval is considerably higher than preapproval spending for research and development. In addition, the cost of developing a single drug is significantly lower than previous estimates, according to new research published in JAMA Internal Medicine.

“A common justification for high cancer drug prices is the sizable research and development (R&D) outlay necessary to bring a drug to the United States market,” Vinay Prasad, MD, MPH, from the division of hematology and medical oncology at the Oregon Health and Science University, and Sham Mailankody, MBBS, from the Memorial Sloan Kettering Cancer Center, wrote. “A recent estimate of R&D spending is $2.7 billion (2017 U.S. dollars). However, this analysis lacks transparency and independent replication.”

Prasad and Mailankody sought to determine the estimated R&D spending for the development of a cancer drug. They analyzed filings from the United States Securities and Exchange Commission to identify pharmaceutical companies that received FDA approval for a cancer drug between Jan. 1, 2006, and Dec. 31, 2015, and had no other drugs on the market at the time of approval (n = 10).

The researchers estimated cumulative R&D from the time of drug development initiation to the date of approval. They also determined earnings from approval to the present. Using the Consumer Price Index, the researchers inflation-adjusted all dollars to 2017 United States dollars.

The analysis indicated that for the 10 drug companies included, it took a median of 7.3 years to develop a drug, with a range of 5.8 to 15.2 years. Half of the drugs (n = 5) received accelerated approval from the FDA, while the other half received regular approval. Drug development cost a median of $648 million, with a range between $157.3 million and $1,950.8 million.

For 7% and 9% opportunity costs, there was a median cost of $757.4 million (range, $203.6 million to $2,601.7 million) and $793.6 million (range, $219.1 million to $2,827.1 million), respectively. The total revenue from drug sales after a median of 4 years since approval was $67 billion, while total R&D spending was $7.2 billion or $9.1 billion including 7% opportunity costs. The median revenue after drug approval was $1,658.4 million.

“In a short period, development cost is more than recouped, and some companies boast more than a 10-fold higher revenue than R&D spending — a sum not seen in other sectors of the economy,” Prasad and Mailankody concluded. “Future work regarding the cost of cancer drugs may be facilitated by more, not less, transparency in the biopharmaceutical industry.”

In a related commentary, Merrill Goozner, MS, editor emeritus of Modern Healthcare, wrote that the findings of Prasad and Mailankody offer a powerful perspective and an essential corrective on cancer drug development costs.

“Current pharmaceutical industry pricing policies are unrelated to the cost of research and development,” Goozner wrote. “Policymakers can safely take steps to rein in drug prices without fear of jeopardizing innovation.” – by Alaina Tedesco

Disclosures: Prasad and Goozner report no relevant financial disclosures. Mailankody reports he has served as a principal investigator for clinical trials with funding from Juno Therapeutics and Takeda Oncology and has received personal fees for speaking at the Wedbush Pacgrow Healthcare Conference 2016.

Revenue from cancer drugs after their FDA approval is considerably higher than preapproval spending for research and development. In addition, the cost of developing a single drug is significantly lower than previous estimates, according to new research published in JAMA Internal Medicine.

“A common justification for high cancer drug prices is the sizable research and development (R&D) outlay necessary to bring a drug to the United States market,” Vinay Prasad, MD, MPH, from the division of hematology and medical oncology at the Oregon Health and Science University, and Sham Mailankody, MBBS, from the Memorial Sloan Kettering Cancer Center, wrote. “A recent estimate of R&D spending is $2.7 billion (2017 U.S. dollars). However, this analysis lacks transparency and independent replication.”

Prasad and Mailankody sought to determine the estimated R&D spending for the development of a cancer drug. They analyzed filings from the United States Securities and Exchange Commission to identify pharmaceutical companies that received FDA approval for a cancer drug between Jan. 1, 2006, and Dec. 31, 2015, and had no other drugs on the market at the time of approval (n = 10).

The researchers estimated cumulative R&D from the time of drug development initiation to the date of approval. They also determined earnings from approval to the present. Using the Consumer Price Index, the researchers inflation-adjusted all dollars to 2017 United States dollars.

The analysis indicated that for the 10 drug companies included, it took a median of 7.3 years to develop a drug, with a range of 5.8 to 15.2 years. Half of the drugs (n = 5) received accelerated approval from the FDA, while the other half received regular approval. Drug development cost a median of $648 million, with a range between $157.3 million and $1,950.8 million.

For 7% and 9% opportunity costs, there was a median cost of $757.4 million (range, $203.6 million to $2,601.7 million) and $793.6 million (range, $219.1 million to $2,827.1 million), respectively. The total revenue from drug sales after a median of 4 years since approval was $67 billion, while total R&D spending was $7.2 billion or $9.1 billion including 7% opportunity costs. The median revenue after drug approval was $1,658.4 million.

“In a short period, development cost is more than recouped, and some companies boast more than a 10-fold higher revenue than R&D spending — a sum not seen in other sectors of the economy,” Prasad and Mailankody concluded. “Future work regarding the cost of cancer drugs may be facilitated by more, not less, transparency in the biopharmaceutical industry.”

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In a related commentary, Merrill Goozner, MS, editor emeritus of Modern Healthcare, wrote that the findings of Prasad and Mailankody offer a powerful perspective and an essential corrective on cancer drug development costs.

“Current pharmaceutical industry pricing policies are unrelated to the cost of research and development,” Goozner wrote. “Policymakers can safely take steps to rein in drug prices without fear of jeopardizing innovation.” – by Alaina Tedesco

Disclosures: Prasad and Goozner report no relevant financial disclosures. Mailankody reports he has served as a principal investigator for clinical trials with funding from Juno Therapeutics and Takeda Oncology and has received personal fees for speaking at the Wedbush Pacgrow Healthcare Conference 2016.

    Perspective
    Abimbola Farinde

    Abimbola Farinde

    The issue of pharmaceutical drug pricing has been at the forefront of a variety of discussions within medical communities, healthcare facilities and amongst consumers for several years. There have been long persisting concerns about how these substantial price increases will impact the quality of care that is being provided to patients. Given these ongoing fluctuations in drug pricing and the study by Prasad and Mailankody which found that the cost of research and development is lower than initially thought, clinicians may fear limited or lack of access to oncologic drugs to prescribe to their patients. This is not a position that clinicians wish to be placed in, so it is important the potential over inflation of drug development pricing does not transfer into their ability to provide optimal care to patients who may ultimately need to be placed on chemotherapeutic drugs.

    • Abimbola Farinde, PhD
    • Professor, Columbia Southern University, Orange Beach, Ala.

    Disclosures: Farinde reports no relevant financial disclosures.