Sunday, January 23, 2005
Estimating the Costs of New Drug Development: Is it really $802m? (Recent Additions to SSRN Database)
"Estimating the Costs of New Drug Development: Is it really $802m?," by Christophers Adams & Van V. Brantner (Bureau of Economics, FTC). Abstract:
This paper replicates DiMasi et al (2003) drug development cost estimates using their published survey cost estimates along with information from a publicly available data set. The results suggest that the expected cost of developing the average drug is even higher than the DiMasi et al (2003) estimate of $802m (in 2000 dollars). The paper estimates the capitalized out-of-pocket cost per new drug to be between $839m and $868m (in 2000 dollars). The paper similarly estimates the expected cost of the average new drug with certain characteristics such as primary indication. It is shown that the expected cost of developing the average HIV/AIDS drug is $479m, while the expected cost of developing the average rheumatoid arthritis drug is twice that, at $936m. For one large pharmaceutical company the expected cost of developing an average drug is $521m, and for another large firm the cost is almost four times that number, coming in at $2,119m. The results support DiMasi et al's claim that the average cost to develop a new drug is over $800m while also suggesting that for some drugs the costs can be much higher or much lower. The results suggest that drug development costs can be influenced by numerous factors including regulatory policy as well as the pharmaceutical firm's own strategic decisions. The results further suggest that a great deal of care must be taken before using these numbers in public policy debates or interpreting them as a measure of actual drug development costs.
[tm - emphasis added]
The FTC's Bureau of Competition recently posted summaries of its FY 2004 settlements with pharmaceutical companies. Among the highlights:
1) 19 of the 22 agreements filed in FY 2004 involved agreements between brand and generic manufacturers, with the remainder occurring between two generic manufacturers;
2) 14 of these 19 agreements resolved patent infringement litigation between brand and generic manufacturers; and
3) no settlement included a payment from the brand to the generic manufacturer in exchange for the generic’s agreement not to market its product.