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Annual State of Clinical Development Costs

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Annual State of Clinical Development Costs - Dr. Glass_1-10-12

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Annual State of Clinical Development Costs

  1. 1. The Annual State of Clinical Development Costs January 10, 2012 | Philadelphia, PAHarold Glass PhD Research Professor, University of the Sciences Visiting Professor, Kings College London President, TTC 1
  2. 2. AgendaI. The detail of the industry challenge may be more severe than we appreciateII. Drug development cost management is increasingly more important: A. CROs and site costs B. Use of CROs C. Use of new geographies D. Use of Standard of Care payment 2
  3. 3. I. The Industry Challenge 3
  4. 4. Eras of Scarcity and Abundance• R&D productivity and relative sales generation have declined, while spending has increased 4
  5. 5. The Old Model is Under Stress• Cheaper genetics, now 78% of volume• More aggressive payers, e.g. the German AMMOG law• Rarer science• The average 5th year sales for an individual drug (in constant 2010 dollars) fell from $575 million in the Era of Abundance to $430 million in the Era of Scarcity, a decline of more than 15% Hewitt, Jeff, David Campell, and Jerry Cacciotti. "Beyond the Shadow of a Drought." Oliver Wyman. (2011): 1-16. Print. 5
  6. 6. Standard of Care in Disease is High and Rising• Whatever the details of the industry challenge, the demand for prescription drugs will inexorably grow.• The industry’s basic business model is different: Coke, Tide, Ivory Soap, Harley Davidson, et. al.• A study noted in a 2011 Oliver Wyman analysis that in 62 of the 127 diseases studied, representing 57% of global pharma sales, headroom for new drugs was limited. 6
  7. 7. II. Drug Development Cost Management: Costs 7
  8. 8. Cost Management• Companies are looking for new ways to achieve better incremental value for money spent on clinical trials • Use of CROs • Greater use of sites in new geographies • Use of Standard of Care to increase payments to sites but reduce sponsor company costs 8
  9. 9. II. A. Drug DevelopmentCost Management: CROs and Site Costs 9
  10. 10. CRO Outsourcing• According to TTC estimates CRO spending reached $11.5 billion in 2010.• Frost and Sullivan estimates that the spending will exceed $20 billion by 2017.• Some early phase project spending slow downs by affect CRO spending.• Our data show that there is much room for CRO growth. 10
  11. 11. In Recent News… Global clinical grant spending totaled $13.1 billion in 2010, with the US representing 58% of the totalBreakdown:Phase I$0.7 billionPhase II$2.4 billionPhase III$9.2 billionPhase IV$.8 billion 11
  12. 12. Comparative Cost Per Visit Index of Cost Per Visit in Clinical Trials by Country (All TAs, Phase I-IV, Year 2009-2011) 1.001.00 0.820.900.80 0.69 0.620.700.60 0.500.50 0.360.40 0.320.300.200.100.00 United United Germany France Poland China India States Kingdom 12
  13. 13. Cost Trends• The cost in new geographies are increasing the most quickly 18% 16% 17% 14% 12% 11% 12% 10% 9% 8% 6% 6% 4% 2% 0% 13
  14. 14. US Overhead Rates • Overhead rates remain an issue for many professionals managing clinical studies30% 30% 25% 26%25% 23% 25% 20%20%15% Actual Overhead10% Officially Reported Overhead 5% 0% 25th 50th 75th 14
  15. 15. UK Overhead Rates • Overhead rates are sometimes a concern in other countries as well, for instance the UK40% 40%35%30% 30% 30% 25%25% 21% 20%20% Actual Overhead15%10% Officially Reported Overhead 5% 0% 25th 50th 75th 15
  16. 16. Global Clinical Grant Spending Top Areas of Spending Top 5 TAs (Phase 1-3) Top 5 TAs (Phase 4) Central Nervous System Oncology 23% 40% and Mental DisordersCentral Nervous System 22% Cardiovascular Diseases 20% and Mental DisordersCardiovascular Diseases 18% Endocrine 10% Endocrine 10% Infectious Diseases 7% Infectious Diseases 7% Genitourinary Diseases 4% … 16 Oncology 3%
  17. 17. CRO vs. Sponsor Grant SpendingMethodology• Generalized linear model with gamma distribution and log link• GrantPlan® database with 73,174 domestic grants and 44,651 foreign grants from 2009 through present• Represents 43 CROs and sponsors• Dependent variable – cost per patient• Primary independent variable – whether or not a CRO negotiated the grant costs• Control variables – number of visits, therapeutic area, phase, study type, and patient type 17
  18. 18. CRO vs. Sponsor Grant Spending Assumptions • Gamma distribution • Independence of observations • Correct link function • Lack of influential outliers 18
  19. 19. CRO vs. Sponsor Grant Spending• CRO and Sponsor Company practices differ. Eastern Latin United Western Asia Europe America States EuropeRelative Costs ofCRO negotiated 132.9% 106.0% 107.6% 93.4% -budgetsP-Value <0.001 <.002 <0.001 <0.001 19
  20. 20. Site Startup Admin Costs• How often are site startup costs itemized by phase? Percent of Startup Costs Itemized Phase II 35% Phase III 35% Phase II-III 35% 20
  21. 21. Site Startup Admin Costs• How often are site startup costs itemized by TA? Percent of Startup Costs Itemized Blood Disorders 50% Cardiovascular 39% Central Nervous System 41% Dermatology 46% Digestive System 17% Endocrine and Metabolic Diseases 31% Genitourinary System 32% Infectious Disease 36% Musculoskeletal System and Connective Tissue 53% Oncology 33% Ophthalmology 3% Pain 54% Respiratory 33% Transplantation 0% All 35% 21
  22. 22. II. B. Drug DevelopmentCost Management: Use of CROs 22
  23. 23. Commercial Outsourcing• Marketing makes extensive use of advertising agencies• One hears many of the same criticisms about agency turnover• Agencies themselves often have relationships with the sponsor with durations no longer than CROs with pharmaceutical companies 23
  24. 24. Commercial Outsourcing• Yet agency staff are more often a part of the brand team than CROs are with the sponsor company project team• The agency is measured on increased brand sales• Making money is an accepted motive 24
  25. 25. CRO Usage• Two dimensions of outsourcing • Scope of work • What will a company be asked to do ranging from a part of one study to a complete study, to a functional area, to major portions of all outsourcing • Degree of Exclusivity • How many companies will be asked to bid ranging from 25
  26. 26. CRO Usage• As with other studies done examining the use of outsourcing, participants in this study thought CRO usage would increase Expected Use of CROs in the Next Five Years Increase 77% Remain the Same 19% Decrease 4% 26
  27. 27. Outsourcing Management• The “better” companies tend to be smaller and located in Europe, but do not spend more on project oversight Ability to Manage the CRO Relationship Clearly 9% betterSomewhat 36% betterAbout the 45% sameSomewhat 9% poorer 27
  28. 28. CRO Usage Percentage of Outsourced/In-Sourced Usage by Clinical Trial Activity Patient On-Site Data Report Enrollment Monitoring Management Biometrics WritingPercentage with SomeElement of Outsourcing 32 34 38 23 21Average PercentageOutsourcing Across all 28studies 32 34 39 23 21
  29. 29. CRO Usage Percentage of Outsourced Usage for Each Clinical Trial Activity by Size of R&D Operations Patient On-Site Data Report Enrollment Monitoring Management Bioetrics WritingMajor CompanyR&D Expenditures Equal toor over US $2 billion 21 24 32 12 12MediumR&D expenditures equal toor over US $7-to less thanUS $2 billion 50 60 49 45 43SmallR&D expenditures under 29US $7 billion 70 70 59 42 43
  30. 30. US Site Preferences • What type of organization do you prefer to run your trials? Many sites are indifferent. This is even more true outside the US. Academic Total Office Based Hospital Medical CenterPharmaceutical Company 34% 32% 39% 36%No Preference 43% 44% 40% 39% CRO 23% 23% 21% 25% 30
  31. 31. II. C. Drug DevelopmentCost Management: Use of New Geographies 31
  32. 32. Reasons for Participating in a Clinical Trial• Factor analysis results • Medical innovation • Financial considerations • Study specific issues 32
  33. 33. Medical Innovation • Investigators around the world take part in medical innovation Investigator Survey Results – Medical Innovation LA Asia Pacific US Investigators Investigators Investigators Rated very Rated very Rated very Individual survey items important important importantThe opportunity to work with a potential new therapeuticoption for subjects who have not responded to availabletreatment, or for whom there are no approved treatments 87% 85% 74%The chance to take part in innovation research, whether ornot the research specifically relates to my patients 59% 79% 54%The opportunity to share with other physicians outside theclinical trial what is learned from my participation in theclinical trial 49% 71% 49%The opportunity to interact with other physicians involvedin the clinical trial 38% 70% 52%
  34. 34. Financial Considerations • Finance is important but second to innovation Investigator Survey Results - Financial Considerations US LA Asia Pacific Investigators Investigators Investigators Rated very Rated very Rated very Individual survey items important important importantThe prospect of additional studies from thesponsoring pharmaceutical company 47% 53% 29%To supplement the revenues/income of mypractice/institutions/department 43% 45% 26%The amount of money required by my site to startthe study until we receive payment from the 34organization running the study 30% 34% 23%
  35. 35. Study Specific Considerations • These considerations vary by geography Investigator Survey Results - Study Specific Considerations LA Asia Pacific US Investigators Investigators Investigators Rated very Rated very Rated very Individual survey items important important importantMy own site experience working in the specific indication ofthe potential study 70% 82% 61%My experience with the sponsoring company or CRO onprevious work I have done with that company or CRO 43% 34% 37%My level of confidence in other drugs already on themarket from that company 28% 55% 34%The sponsoring pharmaceutical company, rather than aCRO, is actually running the day-to-day operations of thestudy 19% 61% 23%A large, multinational pharmaceutical company is 35sponsoring the study 19% 47% 28%
  36. 36. II. D. Drug Development Cost Management: Standard of Care 36
  37. 37. Payment Practices• Based upon a global study of 2,300 sites, there is no evidence that paying above the industry median improves data quality, reduces study completion time or improves site performance • This is true at the study level • And with one exception at the site level 37
  38. 38. SOC Site Survey• We conducted a web-based survey of active US sites, supplimented by follow-up telephone and on-site interviews Respondent Site Type Private Practice Non-Dedicated Research Site Dedicated Research Site Clinic HospitalAcademic Institution Other 0 50 100 150 200 250 300 350 400 38
  39. 39. SOC Site Survey • These are sites which conduct a large number of clinical trials Within the past two years, how many clinical trials did your organization take part in?250200150 100 50 0 0-5 6 - 10 11 - 15 16 - 20 21 or more 39
  40. 40. SOC Site Survey• Many sites are regularly using coverage analysis for clinical trial budgets Percent of sites that conduct coverage analyses90.0% 79 82 8680.0%70.0%60.0%50.0% 40.0% 30.0% 20.0% 10.0% 0.0% All Sites Dedicated Clinical Research Sites Academic Institutions 40
  41. 41. SOC Site Survey• Many sites already submit claims for patients in clinical trials Percent of sites that regularly bill 3rd party payers for clinical trials 80.0% 65 70 70.0% 65 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% All Sites Dedicated Clinical Research Sites Academic Institutions 41
  42. 42. SOC Site Survey• Sites routinely perform coverage analysis in many therapeutic areas For investigators working in specific TAs, how often do they routinely perform coverage analyses in that TA? Oncology Transplantation Cardiovascular Blood Disorders Infectious Disease Musculoskeletal and… Ophthalmology Devices and Diagnostics CNS Respiratory Pharmacokinetics Dermatology Genitourinary System Digestive Systems 0% 10% 20% 30% 40% 50% 60% 70% 42 80% 90%
  43. 43. SOC Site Survey• The main reason sites do not do a coverage analysis is because they are not asked. What is the main reason a site does not conduct coverage analyses? The sponsor does not require it It is too difficult to determine… It will delay the negotiation… It is too time consuming The potential saving do not… It will inhibit patient recruitment 0% 10% 20% 30% 40% 50% 43
  44. 44. SOC Site Survey• Third party payers pay faster than pharmaceutical companies Average Number of Weeks Until Payment Pharmaceutical Third Party Payers Companies 16.2 10.8 44
  45. 45. SOC Usage• Outside of oncology some companies are reluctant to achieve the cost savings possible through the incorporation of Standard of Care • Some worry about slower site start-up times, although there is no evidence of this. • Nearly two-thirds of respondents feel the process is too time-consuming • Most express the need for more data. 45
  46. 46. SOC Usage• There is confusion about Standard of Care from a scientific perspective and from a clinical grant management point of view• An analysis of industry protocols demonstrated that over 20% of grant payments can still be covered by Standard of Care 46
  47. 47. Already in Place…• Many of the research sites are used to applying Standard of Care • NIH – requires SOC • Many states require 3rd party payments for some or all of FDA approved clinical trials• Virtually every clinical site routinelly processes claims with 3rd party insurers• Resistance is often greater within the sponsor company than at the sites 47
  48. 48. SOC Analysis – Type II Diabetes Study 28431754DIA3004_8DEC09Study Duration 66 WeeksNumber of Visits 17Number of Patients ~500Number of Procedures 17Number of SOC Procedures 8Number of Expensive Procedures 0Total Cost for Procedures Per Patient before SOC (w/ overhead) $6,060 USDTotal Cost for Procedures Per Patient after SOC (w/ overhead) $4,276 USDTotal SOC Savings Per Patient $1,785 USDTotal SOC Savings for All Patients $892,500 USDTotal % of SOC Savings 29% 48
  49. 49. Thank You For Your Participation!TTC Corporate Headquarters TTC European4548 Market Street HeadquartersSuite M-20 136 Delaware RoadPhiladelphia, PA 19139 London, W9 2LL UK(215) 243-4103 (Tel) 44 (0)7792 145 831 (Tel)(215) 895-4001 (Fax) 44 (0)2086 584 033 (Fax) Visit our website @ www.ttc-llc.com 49

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