Transcript Pharmaceutical Development Phases: A Duration Analysis

Spending on New Drug Development
Christopher P. Adams
Federal Trade Commission
Saturday, January 26, 2008
(Joyeux Anniversaire à Australie)
Toulouse
Disclaimer: This presentation does not necessarily represent the
views of the FTC or any individual Commissioners.
Industry Background
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$16b or 9% of all industry R&D
expenditure (NSF 2003).
Medical care expenditure $1,589b or 17%
of total personal consumption (BEA 2006).
Saves lives.
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Spending on Drug Development
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Spending on Drug Development
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Spending on Drug Development
Duggan & Evans 2007
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Overview
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Drug Development Process
Cost of Drug Development
Vaccines vs. Drugs
Incentives to Develop New Drugs
Summary
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Spending on Drug Development
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Overview
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Drug Development Process
Cost of Drug Development
Vaccines vs. Drugs
Incentives to Develop New Drugs
Summary
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Drugs Development Process:
Summary
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Preclinical Testing - arrays and animal models.
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Investigational New Drug (IND) filed with FDA.
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Phase I – Safety tests with 20-30 healthy patients.
Phase II – Safety and efficacy with 200-300 patients.
Phase III – Efficacy with 2000-3000 patients.
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New Drug Application (NDA) filed with FDA.
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FDA marketing approval.
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Overview
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Drug Development Process
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Cost of Drug Development
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Vaccines vs. Drugs
Incentives to Develop New Drugs
Summary
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Cost of Drug Development
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June 16 2005 Economist
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“In most industries such figures on the cost of
product development are of purely internal
interest. In the pharmaceuticals business,
however, they have become the subject of
public debate because they are (incorrectly)
linked to drug prices.”
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Cost of Drug Development
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DiMasi et al (2003):
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$802m per New Molecular Entity
Two parts to the estimation
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Actual expenditure on drugs in development.
Probability of success and successful
durations.
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Cost of Drug Development
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Expenditure on Drug Development
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Match number of drugs in development per
firm per year with data on annual expenditure
on pharmaceutical R&D.
Development data: Pharmaprojects
R&D expenditure: CompuStat and Global
Vantage
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Cost of Drug Development
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Expenditure on Drug Development
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$25m
$17m
$32m
$19m
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per drug per year in Clinical Trials.
in Phase I (DiMasi et al $15m)
in Phase II (DiMasi et al $25m)
in Phase III (DiMasi et al $86m)
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Abrantes et al (2005)
Complete Durations
Successful
Failed
Summary Statistics
Phase I
Phase II
Mean
Mean
Duration
Duration
(months)
(months)
Cases
Cases
999
22.1
881
34.0
806
19.7
508
29.9
193
31.9
373
39.5
Probability of Success
Expected Successful Duration
Probability of Success
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80.7%
57.7%
Phase III
Mean
Duration
(months)
Cases
448
44.9
254
47.0
194
42.1
56.7%
96.6
26.4%
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Cost of Drug Development

Probability of Success and Durations
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Chart 1:
Trends in Capitalized Preclinical, Clinical and Total Cost per Approved
New Drug
1000
868
839
802
Millions of 2000 $
800
600
467
400
335
487
472
381 366
318
214
200
138
104
84
54
0
Preclinical
Hansen' 79
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DiMasi' 91
DiMasi' 03
Clinical
Total
PJB without Formulations
PJB with Formulations
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Graph 2: Probability of US Entry
- by Primary Indication
0.70
0 .59
Percentage of US Entry
0.60
0.50
0 .4 1
0 .3 7
0.40
0 .2 8
0.30
0 .2 3
0 .19
0.20
0.10
0 .2 7
0 .2 3
0 .16
0 .2 1
0 .18
0 .14
0 .0 4
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Primary Indication
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Graph 1: Probability of US Entry - by Company
0.35
0. 30
Percentage of US Entry
0.30
0.25
0. 20
0.20
0. 14
0.15
0. 12
0. 10
0.10
0. 09
0. 09
0. 08
0. 07
0. 05
0.05
0.00
A
B
C
D
E
F
G
H
I
J
Company
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Graph 4: Time in Development (Years)
- by Company
J
7.3
4.9
I
Comapny
H
7.9
G
7.5
6.3
F
E
7.3
D
6.3
C
8.9
B
8.6
A
6.5
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Years
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Graph 5: Time in Development (Years)
- by Primary Indication
10.8
Parkinson's Disease
Hypertension
HIV/AIDS
Diabetes
Cancer Prostate
Cancer Leukaemia
Cancer Breast
Asthma
Rheumatoid
Arthritis
Alzheimer's Disease
6.9
Primary Indication
5.5
7.4
7.4
5.5
7.3
8.2
9.2
9.6
8.4
4
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5
6
7
Ye ars
Spending on Drug Development
8
9
10
11
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Cost by Firm
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Cost by Indication
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Cost of Drug Development:
What does it mean?
Does not determine price.
 Not a measure of expenditure.



$21m to $25m per drug per year in
human clinical trials.
An investment hurdle
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Overview

Drug Development Process
Cost of Drug Development

Vaccines vs. Drugs



Incentives to Develop New Drugs
Summary
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Vaccines vs. Drugs:
Success Rates and Durations
ALL
DRUGS
Phase I
Phase II
Phase III
Total (%,
Years)
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Success Rate
Vaccines Drugs
73%
74%
44%
46%
55%
71%
17%
24%
Successful Duration
Vaccines
Drugs
25
18
28
30
38
29
7.48
Number of
Vaccines Drugs
45
754
11
460
12
423
6.48
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Vaccines vs. Drugs:
AIDS Success Rates and Durations
AIDS
Phase I
Phase II
Phase III
Total
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Success Rate (%)
Vaccines
Drug
80%
87%
50%
53%
0%
91%
0%
42%
Successful Duration
Vaccines
Drug
43
22
67
23
20
-
No. of Successes
Vaccines
Drug
8
26
1
20
0
21
5.36
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Vaccines vs. Drugs:
AIDS Vaccines in Development
Vaccine
1
1989
Phase1
1990
Phase1
2
3
4
5
6
7
8
9
10
11
12
1991
Phase1
Phase1
Phase1
1992
Phase1
Phase1
Phase1
Phase1
1993
Phase1
Phase1
Phase2
Phase1
Phase2
Phase1
Phase1
1994
Phase1
Phase1
Phase2
Phase1
Phase2
Phase1
Phase1
Phase1
Phase1
1995
Ceased
Phase1
Phase2
Phase1
Ceased
Phase1
Phase2
Ceased
Phase1
Phase2
1996
Ceased
Phase1
Phase2
Phase1
Ceased
Phase1
Phase2
Ceased
Phase1
Phase2
Phase1
1997
Ceased
Phase1
Phase2
Phase2
Ceased
Phase1
Phase2
Ceased
Phase1
Phase2
Phase1
Phase1
13
14
15
16
17
18
19
20
21
1998
Ceased
Phase1
Phase3
Phase2
Ceased
Ceased
Phase2
Ceased
Phase1
Phase2
Phase1
Phase1
Phase1
1999
Ceased
Phase1
Ceased
Phase2
Ceased
Ceased
Phase2
Ceased
Phase1
Phase2
Phase1
Phase1
Phase1
2000
Ceased
Ceased
Ceased
Phase2
Ceased
Ceased
Phase2
Ceased
Phase1
Phase2
Phase1
Phase1
Phase1
Phase2
Phase1
Phase1
Phase1
2001
Ceased
Ceased
Ceased
Phase2
Ceased
Ceased
Phase2
Ceased
Phase1
Phase2
Phase1
Phase1
Phase2
Phase2
Phase1
Phase1
Phase1
Phase1
Phase1
Phase1
Ceased
2002
Ceased
Ceased
Ceased
Phase2
Ceased
Ceased
Phase2
Ceased
Phase1
Phase2
Phase1
Phase1
Phase2
Phase2
Phase2
Phase2
Phase1
Phase1
Phase1
Phase1
Ceased
Phase2
Phase1
Phase1
22
23
24
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Vaccines vs. Drugs:
Cost of Drug Development
Indication
Vaccine
Biological
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Capitalized
PJB mean PJB mean PJB mean clinical cost
phase I
phase II phase III per approved
length
length
length
new drug
24.6
17.1
27.6
32.6
37.5
27.4
Spending on Drug Development
684.4
383.8
Total
capitalized
cost per
approved new
drug
1266.5
687.9
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Overview
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Drug Development Process
Cost of Drug Development
Vaccines vs. Drugs
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Incentives to Develop New Drugs
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Summary
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Incentives to Develop New Drugs:
Deciles of Drug Revenue
After-tax net sales
3000
2500
2000
1500
$800m
1000
500
0
1
2
3
4
5
6
Deciles
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8
9
10
Grabowski et al., 2002
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Incentives to Develop New Drugs:
Empirical evidence
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1% increase in market size leads to 6 new drugs
entering the market (mostly generic drugs)
(Acemoglu and Lynn (2004)).
Change in government vaccine policies increase
the number of vaccine trials by 2.5 times
(Finkelstein (2004)).
For vaccines a $1 increase in market size leads
to a $0.06 increase in investment (Finkelstein
(2004)).
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Summary
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Cost of Drug Development
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$25m per drug per year
$500m to $2,000m.
Vaccines are more “costly”.
Market size matters, but how much?
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