http://www.reutershealth.com/archive/2001/11/30/eline/links/20011130elin037.html
November 30th, 2001
WASHINGTON (Reuters) - The average
cost to develop a new prescription drug has jumped to $802 million, an
academic research center said Friday, attributing most of the increase
to rising clinical trial costs.
But consumer groups attacked the
new estimate from the Tufts Center for the Study of Drug Development and
one said the actual cost was probably at least 75% lower.
The figure is important because pharmaceutical
companies cite high research and development costs to explain drug prices,
which some politicians and senior citizens' groups have criticized as too
expensive.
The Tufts Center said it based the
$802 million figure, which represents year 2000 dollars, on information
obtained from 10 drug companies. The center previously estimated the cost
at $231 million in 1987 dollars.
The major reason for the jump was
a significant rise in costs for clinical trials, the tests that evaluate
a product's safety and effectiveness in people.
"The size and complexity of the clinical
trials has increased," Kenneth Kaitin, director of the Tufts Center, said
in an interview.
He said new regulatory requirements
added costs, and attempts to sell more products globally required marketing
approval in multiple markets. More companies are also testing drugs for
chronic diseases, which means the medicines need to be tested longer.
The drug industry still is the most
profitable, earning profits as a percent of revenues that are four times
the median rate for all Fortune 500 firms in the late 1990s, the Kaiser
Family Foundation reported Wednesday.
The Tufts figure for drug development
includes the cost of human clinical trials, preclinical tests, expenses
for product failures and the impact of long development times on investment
costs.
The Tufts center, based in Boston
and affiliated with Tufts University, receives funding from pharmaceutical
and biotechnology companies, but Kaitin said the financial support was
unrestricted and the center's research was independent.
He said the research behind the new
cost estimate would be submitted for publication in a peer-reviewed journal
in the coming weeks.
But Bob Young, research director
for Public Citizen's Congress Watch, a consumer group, said the average
for actual after-tax cash outlays was probably 75% less than the Tufts
figure.
He said Tufts' researchers included
expenses that are tax deductible and that more than half of their figure
was attributed to opportunity costs of investing in a potential drug when
the money could have been invested elsewhere.
Young said he had no way to verify
the drug company data provided to Tufts, but if it was accurate, he estimated
the research expenses after taxes were closer to $240 million.
Tufts released its figure ahead of
publication in a journal because it is important to policymakers, Kaitin
said.
US lawmakers are debating how to
help elderly Medicare patients buy prescription drugs they cannot afford.
Pharmaceutical companies have defended their prices by saying they need
to charge enough to fund future research on new medicines.
The Tufts study, "dramatically underscores
the fact that innovative pharmaceutical research is very expensive and
it's becoming more expensive," said Jeff Trewhitt, a spokesman for the
Pharmaceutical Research and Manufacturers of America, the US lobbying group
for brand-name drug makers.
Copyright © 2001 Reuters Limited
By Lisa Richwine