One of the principle claims for allowing pharmaceutical companies to continue their hold on current patent practices, is that research and development (or R&D;) is very expensive. It just keeps coming up, and seems to be all the rage when arguing against things like the passing of Bill C-393 (which you can learn more about in this recent Boingboing post). Although the fact that there are high costs is obviously true, a recent paper published in Biosocieties would suggest that the oft cited statistics, the ones always used to support this assertion for lobbying or public relations purposes, may in fact be over inflated. Here, the authors, Donald W. Light and Rebecca Warburton look closely at where these numbers come from:

“The most widely cited figures (by government officials and the industry’s trade association for its global news network) for the cost to discover and bring a new drug (defined as a ‘new chemical entity’ or ‘new molecular entity’; not a reformulation or recombination of existing drugs) to market are US$802 million in 2000. This has been updated by 64 per cent to $1.32 billion in 2006.”

From this paper, we basically learn that the primary source of these figures come from one particular study published in 2003 and done by Joseph DiMasi, Ronald Hansen, and Henry Grabowski at the Tufts Center for the Study of Drug Development in Boston, Massachusetts. In general, there are issues of bias in how such figures were calculated, and the Light and Warburton paper systematically looks at a number of variables that would suggest that the $802 million number, as well as subsequent numbers which extrapolate from this figure, are a gross over-estimate. The paper is definitely worth a read, having a number of points that would suggest strong mistrust for these industry figures. Examples include:

1. High potential for bias in the data that was used
in the 2003 study: this includes issues related to exclusivity
of access to the data (i.e. we have numbers, but it’s not clear
what the numbers represent exactly since only the Tuft authors
know), or to the sample set itself. i.e. the pharmaceutical
industry appeared to have primary control over whether they
would participate as well as what data was
provided to the Tufts Center. 2. The figures do not include a
number of special and substantial tax provisions for R&D;
work. i.e. Just because such tax measures help in our R&D;
costs, industry feels that it should not be included in these
final figures. 3. About 50% of this $802 million figure is
actually due to “profits foregone.” In other words, as Light
and Warburton succinctly describe, this equates to a ‘You owe
us for all our R&D; costs, plus what we
would have made had we not undertaken the project in the first
place.’ Although this is obviously a factor for businesses to
take into account, the authors ask whether this is really an
appropriate way to calculate figures used to lobby for
government protected pricing? Nevermind the fact, that one
could argue that R&D; costs are a necessity when innovation
is key element for an industry. 4. That trial costs as well as
time estimates are inflated. For trial costs, a number of
different discrepancies occur. For example, how much exactly
does it cost for human test subjects during clinical trials:

The DiMasi team refers rather opaquely to a
complicated set of steps taken to arrive at the mean cost per
trial and per subject. The resulting figure of $23 572 per
subject is six times the average cost per subject of $3861
reported by the National Institutes of Health for 1993, at the
costly (later) end of the DiMasi period (1983 to
1994)

Related to this, is the estimate of
how long does the R&D; process take, since longer time spans
obviously equate to higher costs. Again, these estimates appear
to be greatly exaggerated:

The $802 million
estimate is based on 52 months for preclinical research, 72
months for trials and 18 months for regulatory review, a total
of 142 months or 11.8 years (DiMasi et al, 2003a, pp. 164-166).
Maximizing the length of time not only dramatizes how long and
hard companies work to discover and develop a new medicine, but
also maximizes the multiplication of profits foregone. Long
development times are a major reason given for needing high
prices. These figures, however, do not square with the lengths
for trials actually reported by companies to the US FDA in the
Federal Register. Trial length declined from almost 8 years for
trials started in 1985 to less than 3 years for trials started
in 1995 (Keyhani et al, 2006). Regulatory review times dropped
from 2! years to less than a year. Thus, for medicines that
started testing in 1995, total trial and review time was down
to less than 4 years in the United States and even less in
Europe.

Anyway, it’s causing quite a stir,
and the Tufts Center for the Study of Drug Development have
already issued a terse press
release in rebuttal. In any event, it’s good reason
to be more informed in such matters, because it has
implications in the wider scheme of things – such as how your
health dollars are spent, and also how to make policy more
effective when dealing with global health issues. LINK:
Demythologizing the high costs of pharmaceutical research,
BioSocieties (2011) 6, p34-50
(Note that there is full text access to this article for the
month of March 2011, or you can find the article by typing
“Demythologizing the high costs” into a search
engine).