joseph a. dimasi, ph.d. director of economic analysis tufts center for the study of drug development...
TRANSCRIPT
Joseph A. DiMasi, Ph.D. Director of Economic Analysis
Tufts Center for the Study of Drug DevelopmentTufts University
SLA Pharmaceutical & Health TechnologyDivision Spring Meeting
Boston, MA, March 19, 2007
Measuring Trends in the Development of New Drugs: Time, Costs, Risks and
Returns
Agenda New Drug development times
Risks in new drug development
R&D costs and returns for new drugs
Pace of competitive development
Impact of improvements to the R&D process
Trends in new drug pipelines
New Drug Development Times
0
2
4
6
8
10
12
Year of NDA Approval
Yea
rs
Total Phase
IND Phase
Approval Phase
Points are 3-year moving averages
Mean U.S. Approval and Clinical Phases for
U.S. New Drug Approvals, 1963-2004
Source: Tufts CSDD, 2006
Clinical and Approval Times Vary Across Therapeutic
Classes, 2002-04
Clinical and Approval Times Vary Across Therapeutic
Classes, 2002-04
4.8 1.5
5.2 2.8
5.6 1.9
6.3 0.6
6.3 1.3
6.6 1.9
9.0 0.8
10.4 1.7
0 14Years
Cardiovascular
Anesthetic/Analgesic
Gastrointestinal
AIDS Antivirals
Endocrine
Antiinfectives
Antineoplastic
Neuropharmacologic
Clinical Phase Approval Phase
12.1
7.6
8.5
7.5
8.0
6.3
9.8
Source: Tufts CSDD, 2006
6.9
New Drug Development Risk
Approval Success Rates for NCEs Also Vary by Therapeutic Class
Approval Success Rates for NCEs Also Vary by Therapeutic Class
10.9%
14.4%
15.2%
19.9%
27.2%
40.4%
0 45Approval Success Rate
GI/Metabolism
CNS
Cardiovascular
Respiratory
Oncology/Immunology
Antiinfective
Source: Tufts CSDD Impact Report, 8(3): May/June 2006
Pharmaceutical R&D Productivity
New Drug Approvals Are Not Keeping Pace with Rising
R&D Spending
New Drug Approvals Are Not Keeping Pace with Rising
R&D Spending
0
15
30
45
60
1963 1968 1973 1978 1983 1988 1993 1998 2003
NC
E A
pp
rovals
0
20
40
R&
D E
xp
en
ditu
res
(Billio
ns o
f 2004$)
Source: Tufts CSDD Approved NCE Database, PhRMA, 2005R&D expenditures are adjusted for inflation
R&D Expenditures
New Drug Approvals
Recent Productivity Decline in the Drug Industry: Is this a
Unique Phenomenon?“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.”
Source: U.S. Senate, Report of the Subcommittee on Antitrust and Monopoly, 87th Congress,1st Session, “Study of Administered Prices in the Drug Industry,” June 27, 1961, p.136
Pharmaceutical R&D Costs and Returns
Opportunity Cost for Investments
Consider two investment projects, A and B
Both projects require the same out-of-pocket expenditure (say, $400 million)
However, returns to A are realized immediately, but investors must wait 10 years before returns to B are realized
Rational investors would conclude that B is effectively much costlier than A
Out-of-Pocket and Capitalized Costs per
Approved Drug
121
336 282
466403
802
0
100
200
300
400
500
600
700
800
900
Mil
lio
ns
of
2000
$
Preclinical Clinical Total
Out-of-Pocket Capitalized
Source: DiMasi et al., J Health Economics 2003;22(2):151-185
Pre-approval and Post-approval
R&D Costs per Approved Drug
140
403543
95
802897
0
200
400
600
800
1000
1200
Mil
lio
ns
of
2000
$
Out-of-Pocket Capitalized
Post-approval Pre-approval Total
Source: DiMasi et al., J Health Economics 2003;22(2):151-185
Annual Growth Ratesfor Out-of-Pocket R&D
Costs
7.8%
2.3%
6.1%
11.8%
7.0% 7.6%
Preclinical Clinical Total
1970s to 1980s approvals 1980s to 1990s approvals
Source: DiMasi et al., J Health Economics 2003;22(2):151-185
5,6215,507
3,5673,233
1,3211,576
1977-80 1981-84 1985-88 1990-92 1994-95 1998-01
Approval Period
Su
bje
cts
Mean Number of Subjects in NDAs for NMEs
Sources: Boston Consulting Group, 1993; Peck, Food and Drug Law J, 1997; PAREXEL, 2002
Clinical Trial Complexity Index (Phases I-III)
90
100
110
120
130
140
150
1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: DataEdge, 2002
Summary for R&D Costs R&D costs have grown substantially, even in
inflation-adjusted terms
The growth rate for discovery and preclinical development costs has decreased substantially
Conversely, clinical costs have grown at a much more rapid rate
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)
Summary for R&D Costs (cont.)
Evidence and conjectures regarding factors affecting growth in clinical costs
More clinical trial subjects
Increased complexity: more procedures per patient
Patient recruitment and retention
Treatments associated with chronic and degenerative diseases
Testing against comparator drugs
Returns to New Drug Development
Present Values of Net Sales and R&D Cost
for New Drugs by Sales Decile (millions of 2000 $)
0
500
1000
1500
2000
2500
3000
1 2 3 4 5 6 7 8 9 10
Deciles
Aft
er-t
ax n
et s
ales
After-tax average R&D Cost
Source: Grabowski et al., PharmacoEconomics 2002; 20(Suppl 3):11-29
Biopharmaceutical R&D Costs
71.0%
44.2%
68.5%
21.5%
83.7%
56.3%64.2%
30.2%
Phase I-II Phase II-III Phase III-Approval
Phase I -Approval
Tra
nsit
ion
Pro
babi
lity
Biotech Pharma
Transition Probabilities for Clinical Phases
Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
12.3
19.5
26.0
29.3
33.8
32.9
18.2
16
0 120
Pharma
Biotech
Months
Phase I Phase II Phase III RR
Clinical Development and Approval Times
97.7
90.3
Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
417
265
682615 626
1,241
198
361
559
Preclinical** Clinical Total
Mil
lion
s (2
005$
)
Out-of-pocket Time Capitalized
** 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
Why Might Biopharma Cost Differ?
Biotech firms may be more nimble and creative (different corporate culture)
Replacement therapies may confront fewer safety issues (more relevant to early biotech era development)
However, biotech firms have less experience in clinical development and in interacting with regulatory authorities
Manufacturing process R&D and production of clinical supplies much more expensive for biopharmaceuticals
Biopharmaceutical and Pharma R&D Costs Compared
136
316
452
150
522
672
559
361
198
Preclinical* Clinical Total
Mil
lio
ns
(20
05
$)
Biotech Pharma Pharma (time-adjusted)**
* All R&D costs (basic research and preclinical development) prior to initiation of clinical testing
Pre-Approval Out-of-Pocket Costper Approved New Molecule
** Based on a 5-year shift and prior growth rates for the preclinical and clinical periods
Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
615 626
1,241
376
523
899
439
879
1,318
Preclinical* Clinical Total
Mil
lion
s (2
005$
)
Biotech Pharma Pharma (time-adjusted)**
* All R&D costs (basic research and preclinical development) prior to initiation of clinical testing
Pre-Approval Capitalized Costper 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
The Pace of Competitive Development
Market Exclusivity for First-in-Class has Declined: Mean
Time to First Follow-on Approval
Market Exclusivity for First-in-Class has Declined: Mean
Time to First Follow-on Approval
1.8
2.8
5.1
5.9
8.2
0 9Years
1995-98
1990-94
1985-89
1980-84
1970s
Per
iod
of
Fir
st-i
n-C
lass
Ap
pro
val
Source: DiMasi and Paquette, PharmacoEconomics 2004;22(Suppl 2):1-14
Percent of Follow-on Drugs Reaching Clinical Milestone Prior to First-in-Class Drug Reaching Same Milestone
Percent of Follow-on Drugs Reaching Clinical Milestone Prior to First-in-Class Drug Reaching Same Milestone
14%
10%
27%
42%
35% 36%
0
50
1985-1989 1990-1994 1995-1998
Period of First-in-Class Approval
IND Filed 1st Human Test
Source: DiMasi, Paquette, PharmacoEconomics 2004;22(Suppl 2):1-14
Follow-on Approvals Create Competition Resulting in Price
Discounts
Follow-on Approvals Create Competition Resulting in Price
Discounts
2
0
5 5
6
5 5
3
2
7
0
8
Nu
mb
er o
f N
ew D
rug
s
-10% to -3% -3% to3% 3% to 15% 15% to 40% >40%
Relative Price Discount
Mean Price for Existing Drugs Price Leader
Source: DiMasi, 2000 [http://aspe.hhs.gov/health/reports/drug-papers/dimassi/dimasi-final.htm]
* Analysis based on FYs 1995-1999.
Impact of Improvements in Drug Development Productivity
0%
5%
10%
15%
20%
25%
30%
35%
Success Rate
Cos
t red
uctio
n
Average phase cost Phase cost adjusted for cost of failures
Cost Reductions from Higher Clinical Success Rates
Source: DiMasi, PharmacoEconomics 2002; 20(Suppl 3):1-10
0%
5%
10%
15%
20%
25%
30%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Phase time reduction
Cos
t red
uctio
n
Clinical cost Total cost
Cost Reductions from Simultaneous Percentage
Decreases in All Phase Lengths
Source: DiMasi, PharmacoEconomics 2002; 20(Suppl 3):1-10
Trends in Drug Development Pipelines
0
20
40
60
80
100
1993-1997 1998-2002 2003-2005
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
Trends in New Drug Development Pipelines* by
Therapeutic Class
Trends in New Drug Development Pipelines* by
Therapeutic Class
4.8%
20.5%
4.3%
21.9%
14.3%
13.7%
6.5%
27.2%
8.3%
19.6%
9.1%
11.6%
9.1%
20.2%
10.7%
20.6%
8.7%
7.9%
0% 30%
Respiratory
Oncology/Immunologic
GI/Metabolism
CNS
Cardiovascular
Antiinfective
Percent of Phase I Pipeline
1993-97 1998-02 2003-05
Source: Tufts CSDD Impact Report, 8(3): May/June 2006
* Ten largest pharmaceutical firms
Large Pharmaceutical Firms* are Increasingly Licensing-in
New Drugs
77.870.3 71.8
14.823.6 25.0
7.4 6.23.2
0
20
40
60
80
100
Per
cent
Self-originated Licensed-in Licensed-out
1993-97 1998-02 2003-05
Source: Tufts CSDD Impact Report, 8(3): May/June 2006 * Ten largest pharmaceutical firms
Conclusions Drug development has been and still is costly,
risky, and lengthy
Periods of market exclusivity have shrunk for first-in-class drugs
The potential payoffs for improvements in the development process are substantial
After a period of decline, more new drugs are now entering clinical testing pipelines