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For years, the pharmaceutical industry has maintained that the costs to develop medicines accounts for rising prices. But a new analysis contends that expenses for at least one crucial component of drug development — the clinical trials — are actually modest.

After examining 101 new medicines that were approved by the Food and Drug Administration from 2015 through 2017, researchers found a median cost for clinical trials of \$48 million per drug, with costs ranging from \$20 million to \$102 million. The 225 pivotal trials used to support approvals had a median cost of \$19 million, or roughly \$41,400 per patient, according to the analysis, which was published in BMJ Open.

• Aaron says:

This paper contains a grave misinterpretation of its own statistical analysis. It claims an ‘exponential’ relationship between drug development costs and subject visit numbers, however what they actually fit is a linear relationship between the log subject visit number and the log cost. The result is that the relationship is not exponential, it is sub-linear. Amazingly they fail to report the most important feature of the analysis which is the slope of the regression fit. According to figure 2 this is about .012. Therefore the “exponential” relationship is actually something like cost = B*visit_number^.012 + A, pretty much the opposite of an exponential relationship.

• Thomas Moore says:

Since neither the number of patient visits nor the estimated trial costs had a normal or Poisson distribution, we used log transformations to model the associations of interest and plotted the increasing trial costs and visits on log (or exponential) scales. This helps readers visualize a key feature of the underlying data– while the median cost of a pivotal trial was \$19 million, numerous trials cost > \$100 million and one > \$300 million.

That said, Aaron makes a different but valid point. As the number of patient visits increase, the model shows that the cost for each patient visit goes down, and this is not an exponential relationship. As trials require more patient visits there is a modest economy of scale.

• Susan says:

I fail to see the value in this publication, regardless of the questionable methods. You can’t even GET to a pivotal Phase 3 trial without spending hundreds of millions, let alone all of the failed molecules and trials along the way that have to be absorbed. Why is it so hard to understand that drug development is one of the riskiest and costliest investments around?

• Thomas Moore says:

As the BMJ open paper, the Stat story, and my previous comment have noted, this is NOT an estimate of drug development costs. It is a study of the costs of the key clinical trial that provides substantial evidence that the drug has a treatment benefit. The “value” in this publication is that it provides a perspective on the most important testing requirements, how rigorous they are in recent years, and what such testing costs.

• Judith Gustinis says:

Can someone explain to me why the costs of generic drugs are going through the ceiling? My current Part D insurance classifies one generic I’ve been taking for years as a “Preferred Brand”. What is going on?

• jimbo says:

i have personally worked on a number of trials that were individually more than \$100M, and the latest program with \$320M for 2 pivotal trials + the extension trial. Ph 2 was about 40M and ph 1 about 5. so the trials for that program were \$365M, and it failed

Exactly my point. The authors focus on successful products and ignore the costs of the failures. It’s advocacy research with an agenda. Such is the nature of academia today.

• jimbo says:

yes, but i dont believe his numbers on the successful studies either.

• Thomas Moore says:

Please read the whole study (including the limitations) available free at bmj open. We report numerous trials > \$100 million and one > \$300 million. And our study shows why and when costs vary. See below for the failure issue.

• Observer says:

This is about right. During litigation of dozens of cases, I have observed that actual NDA approval studies costs are always less than \$100M. The huge numbers Big Pharma throws around are almost always from the additional studies they do at the behest of Marketing, to gain new (phony) indications or gain some marketing advantage over a competitor. Have never seen any drug where total actual cost to launch was more than \$200M. The way they justify their blockbuster pricing is just laughable and criminal.

This methodology is akin to measuring the profits of movie studios by studying the costs to make “Avengers: Endgame” but ignoring the money spent to make the movie “Cats.”

• Observer079 says:

Adam Fein, did you pick “Cats” because it lost money, or was it just a random choice?

• Thomas Moore says:

Why we excluded failed trials: Our objective was to put a realistic price tag on the costs of establishing that a drug is beneficial. Failed trials don’t give a useful answer. Trials fail because the drug did not have benefits. They fail because the drug effect was smaller than expected. The can fail if the sponsor gets the dose wrong. Trials fail because the sponsor underestimated toxicity and dropouts compromised the endpoint.

Finally, as we say clearly, the cost of pivotal trials is NOT an estimate of costs for developing a new drug. Failed efficacy trials are only one of numerous costs including toxicology, teratology, carcinogenicity, PK/PD studies, regulatory support, chemical manufacturing quality, …and so forth.

If the paper isn’t about drug costs or pricing, then why did it include this irrelevant statement: “Note that these costs-per-patient for these trials are sometimes similar to what pharmaceutical companies charge for these same drugs to treat a single patient or a handful of patients after marketing approval.”

The authors have expressed similar sentiments about drug pricing in press quotes about their previous research on trial costs.

However, a study of clinical trial costs for successful drugs has extremely limited or no applicability to drug pricing. Among its limitations, this study exclude all other R&D costs, ignored the costs of R&D and trials for drugs that failed, and ignored other uses for the money spent developing these drugs.

P.S. I picked Cats because it’s an example of big R&D investment that lost buckets of money. The movie industry’s winners fund its losers. Sound familiar?