James Love Consumer Project on Technology cptech

1. James Love Consumer Project on Technology http://www.cptech.org SEMINÁRIO INTERNACIONAL: OS DESAFIOS PARA UMA ASSISTÊNCIA FARMACÊUTICA INTEGRAL Brasilia, Brazil 2 de outubro de 2002 Challenges of regulation, research and technological development related with access to medicines.

2. How much does it cost to develop a new drug?

3. Different people have different answers

4. Firms have incentives to exaggerate • Investors are impressed in high R&D figures • R&D costs are used to justify high prices and strong IPR levels • Some tax benefits are based upon R&D expenditures

5. Few policy makers understand how R&D cost estimates are constructed.

6. Different accounting systems can give a misleading understanding of relative contributions by industry and government. • Industry accounting • Start with actual expenditure of USD $30,000 on pre-clinical R&D. • Adjusted for 5,000 to 1 risk, $30,000 is recalculated at $150 million. • Add inflation at 3 percent and 11 percent cost of capital over 12 years. Cost is restated at $722 million. • Government accounting • $30,000 is reported as $30,000.

7. A Tufts University study say the cost is $802 million • The full capitalized resource cost of new drug development was estimated to be $802 million (2000 dollars). This estimate accounts for the cost of failures, including research on compounds abandoned during development, as well as opportunity costs of incurring R&D expenditures before earning any returns. • Press release, Tufts Center for the Study of Drug Development (CSDD), November 30, 2001.

8. Key points in the Tufts' study • Tufts CSDD receives substantial support from pharmaceutical companies. • Data comes from large pharmaceutical companies. • Tufts estimates approximately $300 million for discovery and pre-clinical research (including opportunity cost of capital). • Tufts Study says the risk adjusted costs of clinical trials is $282 million. The “opportunity cost” of capital increases costs of clinical trials to around $.5 billion.

9. The Global Alliance for TB Drug Development October 2001 report, The Economics of TB Drug Development, estimates a new TB drug can be discovered and developed for $115 to $240 million. • Includes cost of failures • Total R&D costs estimated at $115 to $240 million including: • Discovery costs at $40 to $125 million • Development costs at $76 to 115 million

10. TB Alliance figures lower costs for R&D conducted in developing countries • A full programme of clinical development (Phase I through Phase III trials) for a new anti-TB drug is estimated to cost about $26.6 million in a country with an established economy. Comparable studies conducted in a country with a developing economy are estimated to cost approximately $9.9 million. (before adjustments for costs of failures) • The Economics of TB Drug Development, October 2001

11. Evidence on the costs of clinical trials from the US Orphan drug Tax Credit • The US government has a tax credit which reimburses 50 percent of the costs of clinical trials on products that quality as “orphans” under US law. • Orphan designation available for any indication that affects 200,000 or less patients. There is no means test. • There are restrictions on the use of the credit for foreign trials, and government funded research is excluded. • The US IRS releases aggregate data from company tax returns

12. Per-Approval expenditures on clinical trials for orphan drugs were fairly small • From 1981 to 1993, the entire US pharma industry only reported expenditures of $213,792 on clinical trials for orphan products, or $2.3 million per approved product. • For 1997 through 1998, US private sector expenditures on clinical testing for “orphan” products, including the costs of failures, was $283 million, or $7.9 million per approved orphan product. • The tax credit reduced the private sector costs by 50 percent.

13. Joseph DiMasi on Orphan Tax Credit data • “I find the numbers that you have on orphan tax credits to be irrelevant to the question of what is the average resource cost of drug development for the major research-based pharmaceutical firms. They do not tell us what was spent on total clinical period costs prior to approval even just for drugs that received an orphan drug designation. First, unless it can be demonstrated that you cannot find enough patients in the U.S., you do not get credits for foreign clinical testing. Second, and perhaps much more importantly, these drugs can be tested for non-orphan indications, where the trial sizes and costs can be substantial. Orphan drug credits are not given for that testing, so those costs do not show up in the IRS data. Third, I assume from what you put out that you included credits for all designations for which you could obtain data. A good deal of those designations are for indications on drugs that have already been approved for something else. Testing costs on follow-on indications are likely, on average, to be much lower than pre-original approval testing because a good deal is already known about the drug at that point.” • 4 December 2001, ip-health

14. Interesting facts about US orphan drug program • The credit is available both for new drugs and testing for new uses of older products. • Companies claim the credit whether or not the product is approved by the FDA. • From 1983 to 2000, there were 1063 orphan designations, and 218 orphan marketing approvals -- 20.5 percent of tested orphan products received FDA marketing approval. • In some years a significant number of new drugs quality as orphans. For example, in 1998, of the 30 FDA approved new molecular entities, 7 were classified as orphans, or 23 percent of the total.

15. Some orphan drugs are very profitable • What can qualify as an “orphan”? Here are a few examples of profitable orphans: • Initially, all HIV drugs • Glivec • Epogen • Neupogen • Humatrope • Ceredase

16. What are per patient costs for clinical trials? • A 2000, CPTech survey of contract research organizations indicated typical contractor costs of $2 to $7 thousand per patient, depending upon design and location of trial. • One large European pharmaceutical firm says the complete costs of Phase III trials are $10 to $15 thousand per patient. • The TB Alliance says per patient costs for phase III trials in developed economies as high as $22,600,924. • 1999 NIH data on government funded cancer trials put cost are $6,202 per patient.

17. NIH/NCI/DCP Cooperative Group Treatment Trials and Funding: 1993 to 1999

18. Selected Phase I, II and III Clinical Trial Costs in Developing Countries. (Source: The Economics of TB Drug Development, October 2001) • India(a) Phase I bioequivalence study comparing two formulations of a new anti-TB agent. . Cross-over, single IM dose with 7-day washout period between doses Subjects were hospitalized for 2 days. Assessments included 22 blood samples per subject, CBC with differential, serum electrolytes, LFTs, audiometery, HIV screen, pregnancy test, urinalysis, physical exam. Included costs for HPLC assay development and validation. 16 subjects, $29,000 cost, $1,812 per patient • India(a) Multi-center, Phase III study of a new anti-visceral leishmaniasis compound versus a control. 30-day inpatient treatment with a 6-month outpatient follow-up period. Investigator fees were $700 per subject and included all laboratory assessments such as CDC with differential, blood chemistry, LFTs, urinalysis, HIV screen, audiometry, and ECG. Other costs included CRF development, shipping, investigator meetings, data management, reports, and monitor fees. 500 subjects, $727,000 cost. $1,454 per patient. • Africa (a) Multi-center, Phase III study of new antimalarial compound versus control. 3-day treatment with a 14-day follow-up. Investigator fees were $320 per subject and included all laboratory assessments such as CDC with diff, blood chemistry, metheglobin, and PCR analysis. Other costs included CRF development, shipping, investigator meetings, data management, reports, and monitor fees. 2,000 patients. $1,289,200 cost. $644.60 per patient. • South Africa (a) (1996) Phase II EBA Study of new anti-TB agent. 3-day study drug administration, hospitalization – 5 days, CBC with differential x 2, blood chemistry x 2, Audiometry, EBA mycobacteriology, Physical Exam, chest X-ray, HIV screen, and urinalysis. Personnel costs included one medical doctor and two nursing staff. Overhead was responsible for 30 percent of the total costs. 120 patients. $140,000 cost, $1,167 per patient. • South Africa (b) Phase II EBA Study of a new anti-TB agent. Includes hospitalization for 7 days, sputum level monitoring for 3-6 days. Other costs include laboratory assessments such as ,physical exam, x-ray hematology, blood, data collection and storage, subject reimbursement of $150 per subject, bacteriological studies, and department overhead. Does not include monitoring or data validation. 13 patients. $33,638 cost. $2,678 per patient. • South Africa(b). Phase III single-center trial of a new anti-TB agent. A 3-year trial with a 6-month assessment period. Costs include consumables, administrative services, travel, computer costs, maintenance, capital equipment, laboratory costs, and ½ of all staff costs. Costs for monitoring, hospitalization, and ½ of the clinical trial staff are not included. 400 patients. $600,000 cost. $3,525 per patient.

19. R&D investment as a percent of sales • According to data from US tax returns, as a group, the pharmaceutical sector reported spending roughly 7.5 percent of sales in R&D.

20. Trans-Atlantic Consumer Dialogue (TACD) resolution (health 6-00) on transparency of pharmaceutical economics • Any application for data exclusivity should include a disclosure of the costs of data collection. • The EU and the US should require firms that market pharmaceutical drugs in the US or the EU market to disclose, for each product, • annual global (and national) revenues, • costs of clinical trials, disaggregated by timing and nature of trial (Phase I, II, III, IV, etc), the number of patents and the duration of the trial, • when the product involves licenses from third parties, the royalty payments and terms, and • The role of the government in the development of the drug, including the awarding of grants, cooperative research and development agreements, licenses, tax credits and other subsidies.

21. TACD resolution on transparency of pharmaceutical economics, con't • Governments should publish data detailing the government's own costs of conducting clinical trials, which can be used as a benchmark for the cost of clinical trials. • The government should publish reports detailing public expenditures on the purchase of products developed initially with public funds.

22. TACD resolution on transparency of pharmaceutical economics, con't • Policy makers need to obtain better information about pharmaceutical economics, to answer such questions as: • What is the percentage of R&D investments spent on development of new and innovative products, as opposed to "me too" therapies? • How much of the private sector R&D budget is spent on non-essential medicines? • What is the private sector allocation of spending between pre-clinical development, clinical trials, and post approval R&D? • How much R&D is spent on tropical illnesses and other diseases that affect the poor? • How much did a drug benefit from public subsidies?

23. Issues in Compulsory Licensing • Keep it simple. • Public use does not require prior negotiation. • US public use provisions under 1498 • No need to have judicial review • Not required by TRIPS • Compensation can be based upon simple royalty guidelines, or more complex and elegant pharmaeconomic analysis.

24. Issues in Compulsory Licenses • Exports • Now is the time to create Article 30 export provision. • Use it or lose it? • Important for state practice to set global norms. • Developing countries need to establish that compulsory licenses can be routinely used. • Good candidates for compulsory licenses. • Glivec, for leukemia • Singular for Asthma • Various diagnostic devices or tests

25. Research and Development Treaty • TRIPS is an effort to fund global R&D through strong intellectual property rights. • Broader efforts are needed, that reflect public health priorities. • A treaty on R&D would be designed to promote public health goals, and deal with many market failures, such as the funding of basic research, drugs for neglected diseases, and problems relating to access to drugs.

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