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What Does It Cost to Create a Cancer Drug? Less Than You’d Think

“It seems like they have done a thoughtful and rigorous job,” said Dr. Aaron Kesselheim, director of the program on regulation, therapeutics and the law at Brigham and Women’s Hospital.

“It provides at least something of a reality check,” he added.

The figures were met with swift criticism, however, by other experts and by representatives of the biotech industry, who said that the research did not adequately take into account the costs of the many experimental drugs that fail.

“It’s a bit like saying it’s a good business to go out and buy winning lottery tickets,” Daniel Seaton, a spokesman for the Biotechnology Innovation Organization, said in an email.

Dr. Jerry Avorn, chief of the division of pharmacoepidemiology and pharmacoeconomics at Brigham and Women’s Hospital, predicted that the paper would help fuel the debate over the prices of cancer drugs, which have soared so high “that we are getting into areas that are almost unimaginable economically,” he said.

A leukemia treatment approved recently by the Food and Drug Administration, for example, will cost $475,000 for a single treatment. It is the first of a wave of gene therapy treatments likely to carry staggering price tags.

“This is an important brick in the wall of this developing concern,” he said.

Dr. Vinay Prasad, an oncologist at Oregon Health and Science University, and Dr. Sham Mailankody, of Memorial Sloan Kettering Cancer Center, arrived at their figures after reviewing data on 10 companies that brought a cancer drug to market in the past decade.

Since the companies also were developing other drugs that did not receive approval from the F.D.A., the researchers were able to include the companies’ total spending on research and development, not just what they spent on the drugs that succeeded.

One striking example was ibrutinib, made by Pharmacyclics. It was approved in 2013 for patients with certain blood cancers who did not respond to conventional therapy.

Ibrutinib was the only drug out of four the company was developing to receive F.D.A. approval. The company’s research and development costs for their four drugs were $388 million, the company’s S.E.C. filings indicated.

Photo

The drug ibrutinib was developed to treat chronic lymphocytic leukemia, shown here in a CT reconstruction of a patient’s neck. The manufacturer’s return on investment was quite high, according to a new study.

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LLC/Science Source

After it was approved, Janssen Biotech acquired the drug for $21 billion. “That is a 50-fold difference between revenue post-approval and cost to develop,” Dr. Prasad said.

Accurate figures on drug development are difficult to find and often disputed. Although it is widely cited, the Tufts study also was fiercely criticized.

One objection was that the researchers, led by Joseph A. DiMasi, did not disclose the companies’ data on development costs. The study involved ten large companies, which were not named, and 106 investigational drugs, also not named.

But Dr. DiMasi found the new study “irredeemably flawed at a fundamental level.”

“The sample consists of relatively small companies that have gotten only one drug approved, with few other drugs of any type in development,” he said. The result is “substantial selection bias,” meaning that the estimates do not accurately reflect the industry as a whole.

Ninety-five percent of cancer drugs that enter clinical trials fail, said Mr. Seaton, of the biotech industry group. “The small handful of successful drugs — those looked at by this paper — must be profitable enough to finance all of the many failures this analysis leaves unexamined.”

“When the rare event occurs that a company does win approval,” he added, “the reward must be commensurate with taking on the multiple levels of risk not seen in any other industry if drug development is to remain economically viable for prospective investors.”

Cancer drugs remain among the most expensive medications, with prices reaching the hundreds of thousands of dollars per patient.

Although the new study was small, its estimates are so much lower than previous figures, and the return on investment so great, that experts say they raise questions about whether soaring drug prices really are needed to encourage investment.

”That seems hard to swallow when they make seven times what they invested in the first four years,” Dr. Prasad said.

The new study has limitations, noted Patricia Danzon, an economist at the University of Pennsylvania’s Wharton School.

It involved just ten small biotech companies whose cancer drugs were aimed at limited groups of patients with less common diseases.

For such drugs, the F.D.A. often permits clinical trials to be very small and sometimes without control groups. Therefore development costs may have been lower for this group than for drugs that require longer and larger studies.

But, Dr. Danzon said, most new cancer drugs today are developed this way: by small companies and for small groups of patients. The companies often license or sell successful drugs to the larger companies.

The new study, she said, “is shining a light on a sector of the industry that is becoming important now.” The evidence, she added, is “irrefutable” that the cost of research and development “is small relative to the revenues.”

When it comes to drug prices, it does not matter what companies spend on research and development, Dr. Kesselheim said.

“They are based on what the market will bear.”

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