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How much does it cost to bring a cancer drug to market?

Study finds the amount is significantly less than widely reported
Vinay Prasad, M.D., M.P.H.
Vinay Prasad, M.D., M.P.H. (OHSU/Kristyna Wentz-Graff)

The cost of developing a new cancer drug can vary significantly, from $320 million to $2.7 billion, depending on the source. However, new research published today in JAMA Internal Medicine suggests the actual amount is about $648 million.

Cost is an important question, according to study co-author Vinay Prasad, M.D., M.P.H., because those figures often are referenced in debates about the high price of cancer drugs.

“One of the frequently cited justifications for the high drug prices is the sizable R&D [research and development] outlay needed to bring the drug to market,” said Prasad, an assistant professor of medicine (hematology and medical oncology) in the OHSU School of Medicine, member of the OHSU Knight Cancer Institute, and senior scholar in the Center for Ethics in Health Care at OHSU.

“Previous studies have shown widely disparate estimates for the cost of bringing a cancer drug to market, from $320 million to $2.7 billion, while a lack of publicly available data has limited a more accurate estimate,” said Sham Mailankody, M.B.B.S., study co-author and hematologist and medical oncologist at Memorial Sloan Kettering Cancer Center. “We thought if we focused on the R&D spending of some pharmaceutical companies that have only one FDA-approved cancer drug in the market, we might be able to better estimate the cost of developing a cancer drug. We were surprised to see our analysis show this cost to be about $648 million, substantially lower than the often-cited $2.7 billion.”

Prasad says the large discrepancy between the widely cited figure and their research findings is noteworthy: “The amount of money drug companies are skimming off the top is substantial. The costs of these drugs are, in many cases, crippling to patients. And the cost is not justified by R&D spending.”

The study authors also analyzed long-term gains by the pharmaceutical companies and found that after just four years, the 10 drugs analyzed in the study had made more than $67 billion.

“That’s a seven-fold increase in revenue post-approval versus R&D spending,” Prasad said. “That is extremely lucrative. Is there room to lower the price of drugs without stifling innovation? The answer has to be yes, in my opinion.”

Seeking solutions to high drug costs

Prasad says this research disproves the notion that with higher drug prices, comes higher innovation.

“What I would want patients to take away from it is to check your assumptions that these drug prices are warranted,” he says. “We have to speak up, and make our opinions known that we want drugs to be affordable, profits fair and R&D costs truthfully conveyed to us.”

Changes at the state level are necessary, he says: “The states will be the laboratory in which the change happens. It would just take one or two states to pass a strong drug price initiative to help fix things across the country.”

Prasad receives funding from the Laura and John Arnold Foundation through a grant to Oregon Health & Science University. Mailankody is supported in part by support grant/core grant P30 CA008748 from the National Cancer Institute of the National Institutes of Health.

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