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Comment by refurb | Hacker News Reader

Tens of millions of dollars won't get a drug to market. Will it fund research that could find useful leads that could produce a drug? Of course.

So how do you incentive private organizations to fork over the $100 million(1) or so it takes to get a drug to market? You provide a mechanism to regain your capital plus something more. It's a system that works pretty well.

(1) That's if everything works the first time. Since only 1 out of 10 drugs that are tested on humans get to market, it's closer to $1 billion on average.

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"it's closer to $1 billion on average."

As mentioned, that's a hugely suspicious "fact". As noted by the National Center for Biotechnology Information.

"In the March 2003 edition of the Journal of Health Economics, a trio of economists from the United States wrote about a number. Soon after, that number began popping up all over the place — in newspapers and political speeches, on television and the Internet. But the figure, despite reaching near-canonical status, drew criticism. Some said it was inflated. Less diplomatic detractors said it was a 9-digit fairy tale.

That number was 802,000,000. It was, according to the 2003 study, the number of US dollars that pharmaceutical companies spent, on average, to bring a new drug to market (J Health Econ 2003;22[2]:151-85). Now there are new numbers. Some health economists peg the current cost of drug development at US$1.3 billion, others at US$1.7 billion."

Full article here.

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2630351/

Key point: the data used to come up with the original number came from an industry financed source and was not made public. And here's a bit more coverage that throws additional cold water on 10 figure costs.

http://www.theglobeandmail.com/life/health-and-fitness/drug-...

While the actual costs remain unknown, it's a safe bet that they're nothing like the inflated figures being circulated by the industry.

I agree that the numbers thrown around are often a lot of hand waving. However, let me make a few points few points.

1. Check out the Tufts Center for the Study of Drug Development. They calculate the cost to create a new drug and their methodology is very transparent.

http://csdd.tufts.edu/research/research_milestones

2. You can do a simple sniff test on these numbers. Simply call up a CRO that runs clinical trials and ask "What will it cost me to run a Phase III clinical trial?" I did this recently for a project I was working on. They will freely give the numbers about since they are all in competition with each other.

This is what a recent survey of CROs found[1]: "As for the average per-patient trial costs across all therapeutic areas, in Phase I, costs rose from $15,023 in 2008 to $21,883 in 2011. In Phase II, the cost rose from $21,009 to $36,070. In Phase IIIa, the cost increased from $25,280 to $47,523 and in Phase IIIb, cost jumped from $25,707 to $47,095. Finally, Phase IV expenses rose from $13,011 to $17.042."

Let's do some simple calculations. 1000 patients, 1 year trial. You need to complete two Phase III trials to keep the FDA happy.

1000 patients * $47,000 * 2 = $94M

And that's only for phase III trials. Add in the cost of discovery, pre-clinical work, formulation, Phase I, Phase II, all the paperwork with the FDA.

OK, great, now you're approved, you still need to actually make the drug which includes scale-up, testing, FDA certification of the manufacturing process, packing and distribution.

When I was working at a big pharma company, I heard about a new manufacturing site they had built in anticipation of a really big drug being approved. The cost? Several hundred million dollars. What happen when the drug got rejected by the FDA? The manufacturing site was written off (couldn't really be used to make anything else).

That's why your drugs cost so much.

[1]http://www.pharmalot.com/2011/07/clinical-trial-costs-for-ea...

I have heard that drug patents are trivially circumvented by adding some irrelevant part to the active molecule. Instead it is the FDA approval process that prevents ripoffs.

Doesn't that mean pharma is the one industry where patents could be abolished with literally no consequence?

That doesn't follow. If patents were abolished companies that spent nothing on development would be able to produce the exact drug that the FDA had approved.

It is true that you can get around a patent by creating a slightly different molecule. However, drug companies aren't stupid. When they patent a drug, they are patenting a pretty big space around their molecule of interest. Pretty much every modification you can think of, they will patent. The resulting patents aren't just one molecule but rather an IP "space".

Do you think Big Pharma has an interest in keeping these costs high to prevent competition?

I guess that raises a few questions.

1) How do they keep them high? They are buying these services from a third-party.

2) These cost of clinical trials is increasing because FDA evidence requirements are getting stricter and stricter. Back in the 1950s, you could get a drug approved in under 2 years. Now? It's more like 5-8 years. Of course, you end up with much safer drugs this way.

I think #2 answers #1. AKA, they have pushed legislation to increase FDA requirements.

Considering drug companies are always fighting with the FDA to do the bare minimum in terms of clinical studies, I would fathom to guess that your theory can't be supported with the existing evidence.

Actually this a well known process known as regulatory capture.

Where the regulated industry ends up in some kind of symbiosis with its regulator, encouraging it to both grow and to keep competition at bay.

The conflict between the regulators and the regulated industry is largely a farce as they know they need each other.

You know what else will drive up the costs? Running bad trial after bad trial after bad trial, burying the results, and only publishing if and when you finally come up with something positive.

Not only does this provide a dangerously (murderously?) distorted view of the compound in question, it means patients (read: victims) will be paying exponentially more for their "treatments".

It's an increasingly sordid business, and not one that can be defended in good conscience. As the Economist notes in its current review of "Bad Pharma" "This is a book that deserves to be widely read, because anyone who does read it cannot help feeling both uncomfortable and angry."

http://www.economist.com/node/21563689

Funding the expensive regulatory process (which includes clinical trials and all the rest) is very easy to legislate. For example, grant a company some limited exclusive rights for commerce/sale of a drug they have funded through clinical trials.

A commercial restriction on the sale of a drug would be far less onerous and legally problematic than the current patent system.

>For example, grant a company some limited exclusive rights for commerce/sale of a drug they have funded through clinical trials.

Eh, isn't that the textbook definition of a patent?

Not quite.

A patent is granted for the invention of a drug, not the testing. If the monopoly were tied to the approval process, it would be limited to the country where the approval was granted. So shepherding a drug through the FDA approval process would get you a monopoly in the US, but not other countries.

Also, you can patent drugs that haven't been approved, which makes it basically impossible for anyone else to do the clinical trials. Breaking the link between the research and the approval process would make it easier for effective drugs to get tested and approved.

Finally, sure, that scheme would be a lot like patents. But at the very least it would be specific to the drug industry, where they are (maybe) useful, and wouldn't distort other industries where patents are actively harmful.

Ah, I see what you're saying now. That makes quite a bit of sense, especially if it applied only to drugs and medical devices.

They do that now (to an extent).

If you get your drug approved by the FDA, you get 5 years of market exclusivity (12 years of it's a biologic). However, it has to be determined by the FDA to be a NCE (new chemical entity). Right now, a company called Amarin is trying to get a drug approved that has no patent and they are hope to get the FDA to recognize their drug as an NCE.

If it for a very rare disease (orphan drug), you get 7 years of exclusivity (still 12 if it's a biologic).

During that time, no other application for the same NCE and indication will be approved by the FDA, giving the first applicant de facto market exclusivity in lieu of a actual patent.

That's awesome. In my mind, that lets a lot of air out of the pharmaceutical argument for patents.

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