What does a new drug cost? Part II: The productivity problem

What does a new drug cost?

A few weeks ago I reviewed Ben Goldacre’s new book, Bad Pharma, an examination of the pharmaceutical industry, and more broadly, of the way new drugs are discovered, developed and brought to market. As I have noted before, despite the very different health systems that exist around the world, we all rely on private, for-profit, pharmaceutical companies to supply drug products and also to bring newer, better therapies to market. It’s great when there are lots of new drugs appearing, and they’re affordable for consumers and health systems. But that doesn’t seem to be the case. Pipelines seem to be drying up, and the cost of new drugs is climbing. Manufacturers refer to the costs of drug development when explaining high drug prices: New drugs are expensive, we’re told, because developing drugs is a risky, costly, time consuming endeavor. The high prices for new treatments are the price of innovative new treatments, both now and in the future. Research and development (R&D) costs are used to argue against strategies that could reduce company profitability (and presumably, future R&D), be it hospitals refusing to pay high drug costs, or changing patent laws that will determine when a generic drug will be marketed.

The overall costs of R&D are not the focus in Goldacre’s book, receiving only a short mention in the afterword, where he refers to the estimate of £500 million to bring a drug to market as “mythical and overstated.” He’s not alone in his skepticism. There’s a fair number of papers and analyses that have attempted to come up with a “true” estimate, and some authors argue the industry does not describe the true costs accurately or transparently enough to allow for objective evaluations. Some develop models independently, based on publicly available data. All models, however, must incorporate a range of assumptions that can influence the output. Over a year ago I reviewed at a study by Light and Warburton, entitled Demythologizing the high costs of pharmaceutical research, which estimated R&D costs at a tiny $43.4 million per drug – not £500 million, or the $1 billion you may see quoted. Their estimates, however, were based on a sequence of highly implausible assumptions, meaning the “average” drug development costs are almost certainly higher in the real world. But how much higher isn’t clear. There have been at least eleven different studies published that estimate costs. Methods used range from direct data collection to aggregate industry estimates. Given the higher costs of new drugs, having an understanding of the drivers of development costs can help us understand just how efficiently this industry is performing. There are good reasons to be critical of the pharmaceutical industry. Are R&D costs one of them?

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Every day, 19,000 children die from preventable causes. You can help change that.

UNICEF/ HQ07-1076/Shehzad Noorani

The loss of a child is unimaginable to most of us. What if if the cause was completely preventable? For thousands of children, it is.

Want to give a really meaningful gift this year? Why not save the life of a child? It’s possible if you give a gift of vaccines. Your gift of $42 (CAD) buys:

  • 73 Polio Vaccines
  • 73 Tetanus Vaccines
  • 83 Measles Vaccines

I’ve posted this in the past, but I’m going to reiterate it again. Vaccines are astonishingly effective at preventing illness, suffering and death from infectious disease. With the exception of clean water, no other health intervention has saved so many lives: More than 20 million lives in the past 25 years have been saved because of vaccines. More than 100 million infants are now immunized against the most common preventable childhood illnesses each year, saving more than 2.5 million young lives each year. Astonishingly, UNICEF is the world’s largest vaccine provider: they provided 2.6 billion doses of vaccines to children in 8 countries in the span of one year. Every day, 19,000 children die from preventable causes. That number was 33,000 in 1990. You can help contribute to that decline. The elimination of polio is close.

UNICEF, the world’s leading humanitarian and development agency, publishes a Gift of Life catalog each year. The catalog allows you to directly purchase products and services that UNICEF will use to improve the lives of children worldwide.  Gifts range from school supplies to malaria nets. All are worthwhile. If you don’t want to buy vaccines, you can also buy rehydration salts, vaccine carriers, baby scales, anti-infection tablets, and many other products. UNICEF is an efficient charity, with almost all contributions going to programs and services. (The Charity Navigator evaluation of the United States Fund for UNICEF also give it an excellent rating.) With your modest donation, you can make a meaningful difference to the lives of others, help eliminate diseases from the earth, and  demonstrate your science advocacy – all in one gift. And who wouldn’t appreciate a gift like that? I just donated. If you can, please do the same.

Photo from flickr user UNICEF Sverige used under a CC licence.

Getting Better: The Progress of Medicine

I’ve noted before that it’s remarkable how quickly medicine can progress. Most of the therapeutics I learned in pharmacy school is now obsolete. When I started practicing, HIV was treated with only three drugs: AZT, ddI, and ddC. They were modestly effective, and the disease was invariably fatal. Today, the management of HIV has been completely transformed – it can be managed almost like a chronic disease. There’s been remarkable progress in ulcer treatments, too. Peptic ulcers used to be treatable, but usually recurred. Now that the bacterial cause is understood, we can heal ulcers – permanently. The progress in cancer has also been amazing. Some have gone from quickly fatal to highly manageable, and the number of cancers we can cautiously call “curable” is growing. All of this is due to the progress of science in medicine. As new scientific evidence emerge, our understanding of illness changes, and so do our treatments. That’s the long-term view, anyway. Up close, and taking a short-term view, the progress of medicine doesn’t look at smooth. New drugs come on the market, only to be withdrawn. New medical procedures are touted to be panaceas, yet they’re ultimately found to have little effect. We can fool ourselves into thinking we’re helping, when we’re not. When you take short-term perspective, it’s no wonder that people are confused by new medical findings. Information doesn’t emerge in a linear fashion – it’s more like a branching tree, with a lot of dead ends. It’s the dead ends, the controversies, and the contradictory data that get the media attention – the modest but real incremental benefits that are discovered and put into practice each year don’t seem to get the press of the latest wonder/killer drug.9781402792335_FC.225x225-75 Continue reading