08 Jan WHO: Profits Outweigh R&D Costs of New Cancer Drugs
MedicalResearch.com Interview with:
Dr. Kiu Tay-Teo
Kiu Tay-Teo, PhD
World Health Organization
Geneva, Switzerland
MedicalResearch.com: What are the main findings?
Response: High costs and high risks of R&D for drugs have been presented to justify high drug prices, especially for cancer drugs. However, it is unclear whether prices are in fact justifiable compared to the overall return on R&D investment.
In this paper, we systematically compared incomes from the sales of cancer drugs with the R&D costs. We quantified the incomes generated from the sales of 99 cancer drugs approved by FDA from 1989–2017. This was based on sales figures reported in the originator companies’ annual financial reports, and where necessary, estimates deduced from the reported figures. The sales incomes were net of rebates and discounts, but without accounting for expenses and taxes. For the R&D costs of bringing one new cancer drug to the market, the literature reported a typical costs of between $219 million and $2.9 billion, after accounting for the costs of failed products that were investigated but not marketed and the opportunity costs. For the main analysis, we used a median cost of $794 million, as reported in the literature. To be clear, this analysis did not estimate profit return because we do not have information about the costs and year-to-year variations in costs (i.e. expenses and taxes) specific to cancer drugs.
MedicalResearch.com: What is the background for this study?
Response: We found that by the end of 2017, originator companies have received, on average, $14.50 of sales income for every ‘risk-adjusted’ R&D dollar. About a third of the drugs studied had already qualified as “blockbuster drugs” because the average annual sales income exceeded $1 billion. We also found that many drugs, particularly biological products, continued to generate high sales incomes in the hundreds of millions for the originator companies after they are “off patents”.
Our main analysis excluded 57 FDA-approved cancer drugs because data was insufficient. When we included the R&D costs for these excluded drugs but assumed an unrealistic zero income from them, the median return across all 156 medicines remained high at $8.80 for every dollar of R&D cost. When we doubled the estimated median R&D costs to $1588 million for all 99 included drugs, the median income return was $6.70, and the range of estimates was greater than $1 (i.e. more than enough to recover the R&D costs).
MedicalResearch.com: What should readers take away from your report?
Response: Cancer drugs, through high prices, have generated incomes for the companies far higher than their R&D costs. Despite the high returns for the companies, it is known that many healthcare systems and patients around the world cannot afford many cancer medicines because of their high price tags. Our results and observations from other published studies also suggest that the excessive returns might have contributed to inefficiencies in R&D of cancer drugs and stifled clinically meaningful innovation. For instance, cancer experts have pointed out the significant duplication of research efforts for drug candidates of the same or similar mechanisms of action/health conditions. They have also showed that many newer cancer drugs have not shown clinically meaningful benefits, and some may even cause more harms.
Lowering prices of cancer drugs and facilitating greater competition are essential for improving patient access, health system’s financial sustainability, and future innovation. All stakeholders must come together to find a way to correct the unsustainable prices of cancer medicines.
MedicalResearch.com: What recommendations do you have for future research as a result of this work?
Response: It would be informative to examine the returns in other therapeutic areas and the whole sector because there are notable examples of drugs with prices possibly disproportional to their benefits and innovativeness.
Disclosures We are WHO employees but the conclusions in the papers are ours as individuals and do not represent WHO policy.
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Last Updated on January 8, 2019 by Marie Benz MD FAAD