Dimasi 2007s

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  • Distribution of Research Terminations by Therapeutic Category
  • Total Capitalized Cost Reductions from Increases in the Clinical Success Rate
  • Capitalized Clinical and Total Cost Reductions from Simultaneous Reductions in all Phase Times
  • Dimasi 2007s

    1. 1. 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 Measuring Trends in the Development of New Drugs: Time, Costs, Risks and Returns
    2. 2. Agenda <ul><li>New Drug development times </li></ul><ul><li>Risks in new drug development </li></ul><ul><li>R&D costs and returns for new drugs </li></ul><ul><li>Pace of competitive development </li></ul><ul><li>Impact of improvements to the R&D process </li></ul><ul><li>Trends in new drug pipelines </li></ul>
    3. 3. New Drug Development Times
    4. 4. Mean U.S. Approval and Clinical Phases for U.S. New Drug Approvals, 1963-2004 Total Phase IND Phase Approval Phase Points are 3-year moving averages Source: Tufts CSDD, 2006
    5. 5. Clinical and Approval Times Vary Across Therapeutic Classes, 2002-04 12.1 7.6 8.5 7.5 8.0 6.3 9.8 Source: Tufts CSDD, 2006 6.9
    6. 6. New Drug Development Risk
    7. 7. Approval Success Rates for NCEs Also Vary by Therapeutic Class Source: Tufts CSDD Impact Report, 8(3): May/June 2006
    8. 8. Pharmaceutical R&D Productivity
    9. 9. New Drug Approvals Are Not Keeping Pace with Rising R&D Spending Source: Tufts CSDD Approved NCE Database, PhRMA, 2005 R&D expenditures are adjusted for inflation R&D Expenditures New Drug Approvals
    10. 10. Recent Productivity Decline in the Drug Industry: Is this a Unique Phenomenon? <ul><li>“ 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.” </li></ul>Source: U.S. Senate, Report of the Subcommittee on Antitrust and Monopoly, 87 th Congress, 1 st Session, “Study of Administered Prices in the Drug Industry,” June 27, 1961, p.136
    11. 11. Pharmaceutical R&D Costs and Returns
    12. 12. Opportunity Cost for Investments <ul><li>Consider two investment projects, A and B </li></ul><ul><li>Both projects require the same out-of-pocket expenditure (say, $400 million) </li></ul><ul><li>However, returns to A are realized immediately, but investors must wait 10 years before returns to B are realized </li></ul><ul><li>Rational investors would conclude that B is effectively much costlier than A </li></ul>
    13. 13. Out-of-Pocket and Capitalized Costs per Approved Drug Source: DiMasi et al., J Health Economics 2003;22(2):151-185
    14. 14. Pre-approval and Post-approval R&D Costs per Approved Drug Source: DiMasi et al., J Health Economics 2003;22(2):151-185
    15. 15. Annual Growth Rates for Out-of-Pocket R&D Costs Source: DiMasi et al., J Health Economics 2003;22(2):151-185
    16. 16. Mean Number of Subjects in NDAs for NMEs Sources: Boston Consulting Group, 1993; Peck, Food and Drug Law J, 1997; PAREXEL, 2002
    17. 17. Clinical Trial Complexity Index (Phases I-III) Source: DataEdge, 2002
    18. 18. Summary for R&D Costs <ul><li>R&D costs have grown substantially, even in inflation-adjusted terms </li></ul><ul><li>The growth rate for discovery and preclinical development costs has decreased substantially </li></ul><ul><li>Conversely, clinical costs have grown at a much more rapid rate </li></ul><ul><li>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) </li></ul>
    19. 19. Summary for R&D Costs (cont.) <ul><li>Evidence and conjectures regarding factors affecting growth in clinical costs </li></ul><ul><ul><li>More clinical trial subjects </li></ul></ul><ul><ul><li>Increased complexity: more procedures per patient </li></ul></ul><ul><ul><li>Patient recruitment and retention </li></ul></ul><ul><ul><li>Treatments associated with chronic and degenerative diseases </li></ul></ul><ul><ul><li>Testing against comparator drugs </li></ul></ul>
    20. 20. Returns to New Drug Development
    21. 21. Present Values of Net Sales and R&D Cost for New Drugs by Sales Decile (millions of 2000 $) Source: Grabowski et al., PharmacoEconomics 2002; 20(Suppl 3):11-29
    22. 22. Biopharmaceutical R&D Costs
    23. 23. Transition Probabilities for Clinical Phases Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
    24. 24. Clinical Development and Approval Times 97.7 90.3 Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
    25. 25. ** All R&D costs (basic research and preclinical development) prior to initiation of clinical testing Pre-Approval Out-of-Pocket (cash outlay) and Time Costs per Approved New Biopharmaceutical* * Based on a 30.2% clinical approval success rate Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
    26. 26. Why Might Biopharma Cost Differ? <ul><li>Biotech firms may be more nimble and creative (different corporate culture) </li></ul><ul><li>Replacement therapies may confront fewer safety issues (more relevant to early biotech era development) </li></ul><ul><li>However, biotech firms have less experience in clinical development and in interacting with regulatory authorities </li></ul><ul><li>Manufacturing process R&D and production of clinical supplies much more expensive for biopharmaceuticals </li></ul>
    27. 27. Biopharmaceutical and Pharma R&D Costs Compared
    28. 28. * All R&D costs (basic research and preclinical development) prior to initiation of clinical testing Pre-Approval Out-of-Pocket Cost per Approved New Molecule ** 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
    29. 29. * All R&D costs (basic research and preclinical development) prior to initiation of clinical testing Pre-Approval Capitalized Cost per Approved New Molecule ** 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
    30. 30. The Pace of Competitive Development
    31. 31. Market Exclusivity for First-in-Class has Declined: Mean Time to First Follow-on Approval Source: DiMasi and Paquette, PharmacoEconomics 2004;22(Suppl 2):1-14
    32. 32. Percent of Follow-on Drugs Reaching Clinical Milestone Prior to First-in-Class Drug Reaching Same Milestone Source: DiMasi, Paquette, PharmacoEconomics 2004;22(Suppl 2):1-14
    33. 33. Follow-on Approvals Create Competition Resulting in Price Discounts Source: DiMasi, 2000 [http://aspe.hhs.gov/health/reports/drug-papers/dimassi/dimasi-final.htm] * Analysis based on FYs 1995-1999.
    34. 34. Impact of Improvements in Drug Development Productivity
    35. 35. Cost Reductions from Higher Clinical Success Rates Source: DiMasi, PharmacoEconomics 2002; 20(Suppl 3):1-10
    36. 36. Cost Reductions from Simultaneous Percentage Decreases in All Phase Lengths Source: DiMasi, PharmacoEconomics 2002; 20(Suppl 3):1-10
    37. 37. Trends in Drug Development Pipelines
    38. 38. Clinical Testing Pipelines for Large Pharmaceutical Firms* Have Grown in Recent Years (Phase I Starts per year) Source: Tufts CSDD Impact Report, 8(3): May/June 2006 * Ten largest pharmaceutical firms
    39. 39. Trends in New Drug Development Pipelines* by Therapeutic Class Source: Tufts CSDD Impact Report, 8(3): May/June 2006 * Ten largest pharmaceutical firms
    40. 40. Large Pharmaceutical Firms* are Increasingly Licensing-in New Drugs Source: Tufts CSDD Impact Report, 8(3): May/June 2006 * Ten largest pharmaceutical firms
    41. 41. Conclusions <ul><li>Drug development has been and still is costly, risky, and lengthy </li></ul><ul><li>Periods of market exclusivity have shrunk for first-in-class drugs </li></ul><ul><li>The potential payoffs for improvements in the development process are substantial </li></ul><ul><li>After a period of decline, more new drugs are now entering clinical testing pipelines </li></ul>

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