The journal BioSocieties has published a study critical of the cost estimates of new drug development used by PhRMA and the Tufts Center for the Study of Drug Development. The article, Demythologizing the High Costs of Pharmaceutical Research, notes that PhRMA and Tufts claim costs 18 times higher than those analyzed and verified by the authors: $43.4 million versus Tufts' $802 million and PhRMA's $1.3 billion.
While perfectly accurately costs are unlikely to ever appear without an international, agreed-upon set of "R&D accounting standards" followed by completely open books at thousands of small biotechs and Big Pharmas around the globe, the new medicine cost trend is clearly getting worse. But is cost the *real* issue?
Some key facts (from Is Quality by Design Right for My Organization?):
- The average time to market for a new biologic or drug is 10-15 years (1-2 years for discovery, 3-6 years for preclinical, 3-6 for clinical, 1-2 years for review and approval)
- Only 8% of new biopharma compounds ever make it to market
- Less than one-third of all approved new drugs ever recoup their investment costs
- And once a generic hits the market, revenue from the drug declines 80%
So let's put this all in investment terms. Pretend I want to offer you stock in a new company I'll call "Miracle Drug Inc" (MDI). Now, there is only an 8% chance of this company (and your investment) surviving more than 10-15 years. Would you like to invest?
Well, what if I told you that IF MDI survived, your stock will only have a 30% chance to be worth as much as you invested or to make money? Otherwise, you have a 70% chance to just lose money. Still want to invest?
And what if I told you that 8-12 years AFTER your stock actually broke even or made money, it would - guaranteed - lose 80% of its value (and never recover).
Which would give you a more reliable return-on-investment for your money? Investing in MDI and its new miracle drug or hiding your money under your mattress?
This is the real problem - not whether it really costs $43.4 million or $802 million or $1.3 billion to bring a new drug to market - but how to improve the odds of success. Ultimately, it doesn't matter how much a new medicine costs to bring to market as long as the company can make money. But how many of us would give our money away with only an 8% chance divided by another 30% chance just to earn it back?
As I note in my latest book, Get to Market Now! Turn FDA Compliance into a Competitive Edge in the Era of Personalized Medicine, there are really eight powerful factors underlying all of this, and cost is only one:
- Healthcare Cost. Let's be blunt: with declining birth rates, aging retirement populations, debt laden societies, and struggling economies, Western countries cannot afford the best of everything any longer. And those patients in emerging markets - from Latin America to China and India - do not make up a wealthy enough consumer base yet to reliably provide the revenue Big Pharma (much less Big Biotech) has grown used to. In other words, the industry is facing customers who cannot afford the latest and greatest products.
- Knowledge Specialization. In my lifetime alone, we've gone from just general toxicologists to neurotoxicologists to proteomic-neurotoxicologists. Knowledge - and information - has become so complex, so focused, that I count it as a miracle every drug on the market isn't immediately pulled off as every day seems to bring a new scientific advance that questions safety assumptions we held even two or three years ago. This means that putting together a development strategy is like assembling a puzzle that grows more and more pieces every time you sit down.
- Virtual Companies. The advent of the Internet has allowed more and more firms to operate without an actual headquarters, without a manufacturing site, and so on; it's all contracted out or doesn't exist. In the real world, how do you ensure that your new medicine is being manufactured safely or its distributors are storing the medicine properly when your manufacturer or distributor has no physical presence other than a website?
- Generations and Demographics. Demographics are working against biopharma companies and will continue to do so for the next two decades. It may seem that lobby groups like AARP and other senior citizen associations help advocate for new biopharma drugs, but then you have to look at the articles in their newsletters and magazines to see their ratings of Internet pharmacies to get drugs cheap. And make no mistake, there is a growing knowledge gap as experienced regulatory professionals retire all over the globe just as biopharma demands cutting-edge, personalized medicine regulatory experience. Think of it this way: Is it easier to simply retire or to have to spend your last few years getting up to speed on this new thing called "quality by design" and how it relates to personalized medicine?
- Rapid Rate of Technology. Technology is a two-edged sword. On the one hand, it's wonderful that biopharma firms can so rapidly plow through lab testing of new molecular entities. Conversely, because of the rapid rate of technological advancement, two challenges occur: first, automated testing puts people (i.e., future customers) out of work, and second, the regulations can't keep up. For the former, if your customer doesn't have a high-paying job, he/she can't afford your high-priced products. And when it comes to regulations - did you know that when FDA was starting to write 21 CFR 11 on electronic records and computer validation, ALL the computer power on planet earth was LESS THAN the power in today's iPhone? 'Nuff said.
- Globalization. Let's face it, we have supply chains that go around the world at least once. And if I can buy a new medicine for LOT less over the Internet, why wouldn't I? How long will it be before a service exists that conducts random quality tests on Internet-purchased medicines to provide a guaranteed level of purity? And let's add to that the dramatic increase in medical tourism. When it's cheaper for customers to fly overseas to get an operation and medicine than it is to get the products and services from the hospital and pharmacy 3 miles down the road, our business model is not on the right path.
- Increased Compliance Burden. This isn't about more regulations or less regulations; companies have been complaining about regulations since the days of Hammurabi. This is about the fact that the more I have to customize, tailor and personalize my new products to smaller and smaller sub-populations, the more clinical trials I have to conduct, the more quality audits I have to undertake, the more CAPAs and complaints I'll have to deal with, and so on. In other words, the regulatory affairs and quality system approaches of last century seem increasingly out of touch with today's needs.
- Overly Rigid Quality Systems. In light of all of the above, more and more SOPs and policies seem out of step with business requirements in the 21st century: flexibility, cost efficiency, and real risk reduction. My goal with my lean compliance workshops and consulting is to at least tackle and solve this one issue outright (much less try to walk professionals and managers through solving the other challenges associated with FDA, ICH and/or GHTF compliance).
These eight real challenges inhibit new medicine success in the life sciences today. Don't get sidetracked with just one issue. And while there are no easy answers, I've outlined 113 specific tactics that do work in my latest book, along with the examples and case studies that show why these work.
If you'd like to learn more about the book, the publisher is allowing free downloads of the first chapter. You can download the first chapter free of charge at the book's website, http://www.Get2MarketNow.com. The site has links for ordering, as well as reader resources such as downloadable checklists, templates, mini-tutorials, helpful links and so on.
I look forward to hearing your thoughts.