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

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By GINA KOLATA
© 2017 New York Times News Service

What does it really cost to bring a drug to market?


The question is central to the debate over rising health care costs and appropriate drug pricing.

But numbers have been hard to come by. For years, the standard figure has been supplied by researchers at the Tufts Center for the Study of Drug Development: $2.7 billion each, in 2017 dollars.

Yet a new study looking at 10 cancer medications, among the most expensive of new drugs, has arrived at a much lower figure: a median cost of $757 million per drug.

Following approval, the 10 drugs together brought in $67 billion, the researchers also concluded — a more than sevenfold return on investment. Nine out of 10 companies made money, but revenues varied enormously. One drug had not yet earned back its development costs.

The study, published Monday in JAMA Internal Medicine, relied on company filings with the Securities and Exchange Commission to determine research and development costs.

The figures were met with swift criticism, however, by some 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. 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 FDA, 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 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 FDA approval. The company’s research and development costs for their four drugs were $388 million, the company’s SEC filings indicated.

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,” Prasad said.