It’s no secret that developing and clinically testing drugs to treat conditions like cancer is a long and rigorous process. But the financial costs could be dramatically less than many people think.
An oft-quoted figure used by the pharmaceutical industry and once even referenced by President Trump puts the outlay at about US$2.7 billion in 2017 dollars to bring a drug to market, but a new analysis suggests that’s way more than what it actually costs.
Researchers investigated US Securities and Exchange Commission filings for 10 separate cancer medications, and found the median cost of drug development was US$648 million – not pocket change, sure, but a fraction of the $2.7 billion figure which pharmaceutical companies use to justify expensive medication pricing.
The drugs involved in the study weren’t exactly quick wins either, taking a median time of 7.3 years in research and development (R&D) – but that effort paid off handsomely, bringing in US$67 billion in revenue for the companies in total after, on average, four years of sales, from R&D spending of US$7.2 billion total.
The researchers say that “extremely lucrative” discrepancy needs to be recognised by patients, and hope their figures serve as a wake-up call for the healthcare industry at large.
“The amount of money drug companies are skimming off the top is substantial,” says one of the team, oncologist Vinay Prasad from Oregon Health and Science University.
“The costs of these drugs are, in many cases, crippling to patients. And the cost is not justified by R&D spending.”
It’s a noble cause – especially since cancer drugs can cost hundreds of thousands of dollars annually – but the researchers acknowledge their small sample can’t necessarily be taken as representative of the industry at large.
That’s especially because, in order to focus on how R&D contrasts to revenue, the team only looked at relatively small drug companies who were bringing a single drug to market.
In other parts of the healthcare sector, where massive corporations control and fund numerous research projects looking at various drug candidates, it could be a different story – and it’s a limitation of the study that the industry has seized upon.
“It’s a bit like saying it’s a good business to go out and buy winning lottery tickets,” a spokesman for the Biotechnology Innovation Organisation, Daniel Seaton, told The New York Times.
According to Seaton, 95 percent of cancer drugs that enter clinical trials end up failing – losses that have to be made up for by the profitable medications that do end up finding a way to market and into patient care.
“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,” Seaton said.
Of course, because the pharmaceutical industry doesn’t always clearly disclose how much it spends on funding the drugs it makes, it’s hard to determine a more comprehensive estimate.
The $2.7 billion benchmark comes from a 2016 study conducted by Tufts University. It looked at over 100 drugs, but the researchers weren’t focussing on cancer medications, and the study – which received funding from the pharmaceutical industry – didn’t disclose what the drugs actually were.
Until some kind of middle ground can be reached and more data is disclosed by the biggest companies in the healthcare sector, we may not get a better estimate – but Prasad’s study is sure to help fuel the debate over medication costs, and that’s definitely not a bad thing.
“What I would want patients to take away from it is to check your assumptions that these drug prices are warranted,” Prasad says.
“We have to speak up, and make our opinions known that we want drugs to be affordable, profits fair, and R&D costs truthfully conveyed to us.”