Transcript Document

Measuring Trends in the Development of
New Drugs: Time, Costs, Risks and
Returns
Joseph A. DiMasi, Ph.D.
Director of Economic Analysis
Tufts Center for the Study of Drug Development
Tufts University
SLA Pharmaceutical & Health Technology
Division Spring Meeting
Boston, MA, March 19, 2007
Agenda
 New Drug development times
 Risks in new drug development
 R&D costs and returns for new drugs
 Pace of competitive development
 Impact of improvements to the R&D
process
 Trends in new drug pipelines
New Drug Development Times
Mean U.S. Approval and Clinical Phases for
U.S. New Drug Approvals, 1963-2004
12
10
Total Phase
Years
8
6
IND Phase
4
Approval Phase
2
0
19
64
19
68
19
72
19
76
19
80
19
84
19
88
Year of NDA Approval
Source: Tufts CSDD, 2006
Points are 3-year moving averages
19
92
19
96
20
00
20
04
Clinical and Approval Times Vary
Across Therapeutic Classes, 2002-04
10.4
Neuropharmacologic
1.7
9.0
Antineoplastic
0.8
6.6
Antiinfectives
Endocrine
6.3
AIDS Antivirals
6.3
1.9
1.3
0.6
5.6
Gastrointestinal
4.8
Cardiovascular
0
7.5
8.0
6.3
14
Years
Clinical Phase
Source: Tufts CSDD, 2006
8.5
6.9
2.8
1.5
9.8
7.6
1.9
5.2
Anesthetic/Analgesic
12.1
Approval Phase
New Drug Development Risk
Approval Success Rates for NCEs
Also Vary by Therapeutic Class
40.4%
Antiinfective
27.2%
Oncology/Immunology
19.9%
Respiratory
15.2%
Cardiovascular
14.4%
CNS
10.9%
GI/Metabolism
0
Approval Success Rate
Source: Tufts CSDD Impact Report, 8(3): May/June 2006
45
Pharmaceutical R&D Productivity
New Drug Approvals Are Not Keeping
Pace with Rising R&D Spending
60
40
R&D Expenditures
30
20
New Drug Approvals
15
0
1963
0
1968
1973
1978
1983
1988
R&D expenditures are adjusted for inflation
Source: Tufts CSDD Approved NCE Database, PhRMA, 2005
1993
1998
2003
R&D Expenditures
(Billions of 2004$)
NCE Approvals
45
Recent Productivity Decline in the Drug
Industry: Is this a Unique Phenomenon?
“In 1960 the trade press of the U.S. drug
industry began to refer to the last few
years as constituting a “research gap,”
commenting that the flow of important new
drug discoveries has for some inexplicable
reason diminished.”
Source: U.S. Senate, Report of the Subcommittee on Antitrust and Monopoly, 87th Congress,
1st Session, “Study of Administered Prices in the Drug Industry,” June 27, 1961, p.136
Pharmaceutical R&D Costs and Returns
Opportunity Cost for Investments
 Consider two investment projects, A and B
 Both projects require the same out-of-
pocket expenditure (say, $400 million)
 However, returns to A are realized
immediately, but investors must wait 10
years before returns to B are realized
 Rational investors would conclude that B
is effectively much costlier than A
Out-of-Pocket and Capitalized
Costs per Approved Drug
Millions of 2000 $
900
802
800
700
600
500
400
300
200
100
0
466
336
403
282
121
Preclinical
Clinical
Out-of-Pocket
Total
Capitalized
Source: DiMasi et al., J Health Economics 2003;22(2):151-185
Pre-approval and Post-approval
R&D Costs per Approved Drug
Millions of 2000 $
1200
897
1000
802
800
543
600
403
400
200
0
140
95
Out-of-Pocket
Capitalized
Post-approval
Pre-approval
Source: DiMasi et al., J Health Economics 2003;22(2):151-185
Total
Annual Growth Rates
for Out-of-Pocket R&D Costs
11.8%
7.8%
7.0% 7.6%
6.1%
2.3%
Preclinical
Clinical
1970s to 1980s approvals
Total
1980s to 1990s approvals
Source: DiMasi et al., J Health Economics 2003;22(2):151-185
Mean Number of Subjects in NDAs
for NMEs
Subjects
5,507
3,233
1,576
5,621
3,567
1,321
1977-80 1981-84 1985-88 1990-92 1994-95 1998-01
Approval Period
Sources: Boston Consulting Group, 1993; Peck,
Food and Drug Law J, 1997; PAREXEL, 2002
Clinical Trial Complexity Index (Phases I-III)
150
140
130
120
110
100
90
1992
1993
1994
Source: DataEdge, 2002
1995
1996
1997
1998
1999
2000
Summary for R&D Costs
 R&D costs have grown substantially, even in
inflation-adjusted terms
 The growth rate for discovery and preclinical
development costs has decreased substantially
 Conversely, clinical costs have grown at a much
more rapid rate
 New discovery and development technologies
(e.g., genomics) hold the promise of lower costs in
the long-run (but perhaps higher costs in the
short-run)
Summary for R&D Costs (cont.)
 Evidence and conjectures regarding factors
affecting growth in clinical costs
 More clinical trial subjects
 Increased complexity: more procedures per
patient
 Patient recruitment and retention
 Treatments associated with chronic and
degenerative diseases
 Testing against comparator drugs
Returns to New Drug Development
Present Values of Net Sales and R&D Cost
for New Drugs by Sales Decile (millions of 2000 $)
After-tax net sales
3000
2500
2000
1500
1000
After-tax average R&D Cost
500
0
1
2
3
4
5
6
7
8
Deciles
Source: Grabowski et al., PharmacoEconomics 2002; 20(Suppl 3):11-29
9
10
Biopharmaceutical R&D Costs
Transition Probability
Transition Probabilities for Clinical Phases
83.7%
71.0%
68.5%
64.2%
56.3%
44.2%
30.2%
Phase I-II
Phase II-III
Biotech
Phase IIIApproval
Pharma
Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
21.5%
Phase I Approval
Clinical Development and Approval Times
19.5
Biotech
Pharma
12.3
29.3
26.0
32.9
33.8
16
18.2
97.7
90.3
0
120
Months
Phase I
Phase II
Phase III
RR
Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
Pre-Approval Out-of-Pocket (cash outlay) and Time
Costs per Approved New Biopharmaceutical*
Millions (2005$)
1,241
682
626
615
559
417
361
265
198
Preclinical**
Clinical
Out-of-pocket
Time
Total
Capitalized
* Based on a 30.2% clinical approval success rate
** All R&D costs (basic research and preclinical development) prior to initiation of clinical testing
Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
Why Might Biopharma Cost Differ?
 Biotech firms may be more nimble and creative
(different corporate culture)
 Replacement therapies may confront fewer safety
issues (more relevant to early biotech era
development)
 However, biotech firms have less experience in
clinical development and in interacting with
regulatory authorities
 Manufacturing process R&D and production of
clinical supplies much more expensive for
biopharmaceuticals
Biopharmaceutical and Pharma
R&D Costs Compared
Pre-Approval Out-of-Pocket Cost
per Approved New Molecule
Millions (2005$)
672
522
559
452
361
198
136
316
150
Preclinical*
Biotech
Clinical
Pharma
Total
Pharma (time-adjusted)**
* All R&D costs (basic research and preclinical development) prior to initiation of clinical testing
** Based on a 5-year shift and prior growth rates for the preclinical and clinical periods
Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
Pre-Approval Capitalized Cost
per Approved New Molecule
1,318
Millions (2005$)
1,241
899
879
626
615
376
523
439
Preclinical*
Biotech
Clinical
Pharma
Total
Pharma (time-adjusted)**
* All R&D costs (basic research and preclinical development) prior to initiation of clinical testing
** Based on a 5-year shift and prior growth rates for the preclinical and clinical periods
Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
The Pace of Competitive Development
Period of First-in-Class Approval
Market Exclusivity for First-in-Class
has Declined: Mean Time to First
Follow-on Approval
8.2
1970s
5.9
1980-84
5.1
1985-89
2.8
1990-94
1.8
1995-98
0
9
Years
Source: DiMasi and Paquette, PharmacoEconomics 2004;22(Suppl 2):1-14
Percent of Follow-on Drugs Reaching
Clinical Milestone Prior to First-inClass Drug Reaching Same Milestone
50
42%
35%
36%
27%
14%
10%
0
1985-1989
1990-1994
Period of First-in-Class Approval
IND Filed
1st Human Test
Source: DiMasi, Paquette, PharmacoEconomics 2004;22(Suppl 2):1-14
1995-1998
Follow-on Approvals Create Competition
Resulting in Price Discounts
8
Number of New Drugs
7
6
5
5
5
5
3
2
0
2
0
-10% to -3%
-3% to3%
3% to 15%
15% to 40%
>40%
Relative Price Discount
Mean Price for Existing Drugs
Price Leader
* Analysis based on FYs 1995-1999.
Source: DiMasi, 2000 [http://aspe.hhs.gov/health/reports/drugpapers/dimassi/dimasi-final.htm]
Impact of Improvements in Drug
Development Productivity
Cost reduction
Cost Reductions from Higher Clinical
Success Rates
35%
30%
25%
20%
15%
10%
5%
0%
34
33
32
31
30
29
28
27
26
25
24
23
22
21
.5
.5
.5
.5
.5
.5
.5
.5
.5
.5
.5
.5
.5
.5
%
%
%
%
%
%
%
%
%
%
%
%
%
%
Success Rate
Average phase cost
Phase cost adjusted for cost of failures
Source: DiMasi, PharmacoEconomics 2002; 20(Suppl 3):1-10
Cost Reductions from Simultaneous
Percentage Decreases in All Phase Lengths
Cost reduction
30%
25%
20%
15%
10%
5%
0%
0%
5%
10% 15% 20% 25% 30% 35% 40% 45% 50%
Phase time reduction
Clinical cost
Total cost
Source: DiMasi, PharmacoEconomics 2002; 20(Suppl 3):1-10
Trends in Drug Development Pipelines
Clinical Testing Pipelines for Large Pharmaceutical Firms*
Have Grown in Recent Years (Phase I Starts per year)
100
80
60
40
20
0
1993-1997
1998-2002
* Ten largest pharmaceutical firms
Source: Tufts CSDD Impact Report, 8(3): May/June 2006
2003-2005
Trends in New Drug Development
Pipelines* by Therapeutic Class
7.9%
11.6%
13.7%
Antiinfective
8.7%
9.1%
Cardiovascular
14.3%
20.6%
19.6%
21.9%
CNS
GI/Metabolism
4.3%
8.3%
10.7%
20.2%
Oncology/Immunologic
20.5%
6.5%
4.8%
Respiratory
0%
27.2%
9.1%
Percent of Phase I Pipeline
1993-97
1998-02
* Ten largest pharmaceutical firms
Source: Tufts CSDD Impact Report, 8(3): May/June 2006
2003-05
30%
Large Pharmaceutical Firms* are
Increasingly Licensing-in New Drugs
100
77.8
Percent
80
70.3 71.8
60
40
23.6 25.0
14.8
20
7.4 6.2
3.2
0
Self-originated
Licensed-in
1993-97
1998-02
Licensed-out
2003-05
* Ten largest pharmaceutical firms
Source: Tufts CSDD Impact Report, 8(3): May/June 2006
Conclusions
 Drug development has been and still is costly,
risky, and lengthy
 Periods of market exclusivity have shrunk for
first-in-class drugs
 The potential payoffs for improvements in the
development process are substantial
 After a period of decline, more new drugs are
now entering clinical testing pipelines