A recent study suggests that anti-cancer drugs in the US are significantly overpriced, and that even with research and development costs considered, these elevated prices cannot be justified.
The extraordinary cost associated with cancer treatment is another burden that sufferers, and their families, are expected to carry. Typically, a yearlong course of anti-cancer drugs will cost in excess of $100,000. You would not be alone in concluding that these strikingly inflated costs are a side effect of the nature of anti-cancer drug R&D; a process which utilizes cutting edge research facilities and necessitates a high degree of intellectual and financial investment.
However, according to a recent analysis published in the Journal of the American Medical Association, the median revenue derived from the sale of many anti-cancer drugs is significantly higher than the initial R&D expenditure. This certainly calls into question the claim that the inflated prices are needed to recoup the initial outlay for R&D, as many pharmaceutical companies assert.
The analysis, conducted by cancer physicians Vinay Prasad, of Oregon Health and Science University, and Sham Mailankody, of Memorial Sloan Kettering Cancer Center, assessed the development costs pertaining to ten separate anti-cancer drugs that had recently been approved for use by the US Food and Drug Administration and filed with the US Securities and Exchange Commission. The median R&D cost was estimated to be $648 million. However, the median revenue was estimated to be a little over $1.65 billion.
“I think these results would suggest that pharmaceutical drug development is extremely lucrative and the current drug prices are not necessarily justified by the R&D spending on these drugs,” Mailankody said when speaking with Richard Harris from NPR.
Of course, there is conjecture over just how much it does cost to develop anti-cancer drugs and bring them to market. A widely touted, industry backed estimate, carried out by the Tufts Center for the Study of Drug Development, suggests that it costs $2.7 billion to do so.
However, according to Prasad and Mailankody’s paper, the Tufts Center for the Study of Drug Development’s estimate was based on financial data protected by confidentiality agreements and therefore not available for external scrutiny. Based on this lack of transparency, they had doubts about the estimate’s integrity.
Prasad and Mailankody decided to take a different approach with their estimate; to focus on publicly traded pharmaceutical companies who were industry “rookies”. In other words, they solely focused on companies who were bringing their first drugs to market. That way, the expenditure and revenue differences could be easily ascertained for a single drug and not in relation to other products. In addition, the estimate could be based on readily available, uncensored information.
Of the ten companies analyzed, nine had significant revenues in relation to initial R&D costs, with revenue percentage increases ranging from 17.50% to 6789%. The highest revenues can be attributed to both regular sales and to the fact that some drugs were later acquired by other companies.
In light of these findings, Joseph DiMasi, director of economic analysis at the Tufts Center for the Study of Drug Development, defended his original estimates. As reported by NPR, he emphasized that for every one cancer drug that does make it to market, there are approximately seven that fail, and that these R&D costs also need to be recouped. He emphasized that this was not taken into consideration in Prasad and Mailankody’s analysis.
Nonetheless, Prasad and Mailankody propose that the confusion over anti-cancer drug R&D costs could be allayed if relevant pharmaceutical company data was more readily available.
And that sheds light on the bigger issue at play here – the need for transparency.