A host of new expensive breakthrough medications have inflamed the debate over the true cost of drug development.
Many contend that criticism of drugs priced like Gilead Sciences' $84,000 hepatitis C medication Sovaldi fails to take into account the millions invested in research and development by the company to get the therapy onto the market.
An analysis released last November by the Tufts Center for the Study of Drug Development estimated it costs an average of $2.6 billion to develop a prescription medication that gains approval by the Food and Drug Administration.
But an article published Wednesday in the New England Journal of Medicine says that the Tufts analysis doesn't actually reflect the economic investment a drug company makes because it fails to recognize the large public contribution made to bring innovative therapies like Sovaldi to the market.
“Pharmaceutical companies do invest heavily in the work needed to bring successful products to market and often in the underlying research on which those products are based,” wrote Dr. Jerry Avorn, a Harvard Medical School professor who has extensively studied the relationship between the cost of medications and their benefits and risks. “But as risky as drug development is, the pharmaceutical and biotech industries remain among the most profitable sectors of the U.S. economy and actually spend only a small fraction of their revenues on truly innovative research.”
Avorn contends the Tufts estimate does not consider the large number of new medications being sold by pharmaceutical firms that were derived originally from publicly funded research. He cites an analysis published in the February issue of Health Affairs that found that the majority of groundbreaking drugs developed and approved by the Food and Drug Administration between 1984 and 2009 were based on “discoveries made by academic researchers who were supported by federal government funding.”
The cost to develop new drugs has gained considerable attention recently as lawmakers consider legislation aimed at increasing the number of innovative therapies. Part of that legislative debate is focused on how to give companies incentives to invest more in research and development.
The proposed 21st Century Cures Act, which advanced to the full House Energy and Commerce Committee Thursday, included controversial provisions in its original draft that would have extended patent protection for up to 15 years for medicines that treat “one or more unmet needs.”
A second version of the bill removed the market exclusivity provisions, but the latest draft released this week (PDF), restored a provision that would extend market exclusivity for orphan drugs by six months.
In response to the Avorn's article, Tufts researchers wrote a letter to the editor of NEJM defending the findings of their report. They contend the study was designed to identify only the costs incurred by the companies for research and development.
“Avorn makes the valid and important point that not all costs associated with the discovery and development of new drugs are borne by the private sector,” researchers wrote. “The full social cost would be the sum of the private costs and government and nonprofit funding for research that contributes to the discovery and development of new drugs. The latter element of social cost would be very difficult to quantify adequately.”