big pharma pricing and innovation
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Pharmaceutical Pricingand Innovation
Merrill GooznerDirector
Integrity in Science Project
Center for Science in the Public Interest
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The $800 MillionPill
The Truth Behind the
Cost of New Drugs
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Spending on Prescription Drugs in the
United States 1990-2013 (projected)SOURCE: IMS HEALTH
0
100
200
300
400
500
600
1990 2000 2003 2006 2009 2012
Historical
Projected
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The Rx Cost Gap 2003 -- $184 billion
2013 -- $510 billion
Senior citizens buys 60 percent of all drugs
Government projected annual spendingunder last years Medicare bill -- $60-100
billion
Senior out-of-pocket expenditures by 2013
will double even with Medicare benefit
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Why do Americans
pay the highest prices
in the world for
drugs?
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The Industry Story:
The U.S. foots the bill for global pharmaceutical
innovation Industry is the primary source of new drugs
It now costs over $1 billion to develop a newdrug Tufts
R&D costs and expenditures are rising rapidly Without high prices, Rx innovation will dry up
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The alternative (common sense) story:
Innovation depends on understanding the biological causesof disease
Even then, developing successful therapeutic interventionsis a long, difficult process that requires the single-mindedfocus of dedicated scientists who often dont succeed
The most creative steps of the innovation process thesteps on which innovation depends take place early in theprocess
As a result, significant medical breakthroughs are rare andare almost always the product of research funded by thepublic sector
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Where does the Consumer drug dollar go?
The Rx Industry D ollar -- Where It Goes
Cost of Goods Sold
20.7
Marketing &
Administration31.7R&D15.6
Other
9
Taxes
5.5
Profit18.3
Cost of Goods Sold
Marketing & Administration
R&D
Other
Taxes
Profit
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Wasteful expenditures
90,000 detailers
Direct-to-consumer advertising Seeding trials
Building physician loyalty Continuing Medical Education
Speakers bureaus
Consultancies
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The R&D story
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Trends in Biomedical Research Spending
SOUTCE: Innovation or Stagnation? Food and Drug Administration
0
50
100
150
200
250
300
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
NIH
RX R&D
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Trends in New Drug and Biological
Product Submissions to FDASOURCE: Innovation or Stagnation? Food and Drug Administration
0
20
40
60
80
100
120
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Biologics
NMEs
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Biohype I Amgen and Epogen
Eugene Goldwasser the longest search
Applied Molecular Genetics v. GeneticsInstitute at the dawn of the biotech era
Selling the cancer market to fund clinical trials ESRD and Epo biomedical industrial policy
The fat gene and other dead ends The next blockbuster Aranesp
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Biohype II Genzyme and Rare Disease
Roscoe Brady, lipid disorders and the birth of
Genzyme Ceredase -- the most expensive drug in the world
despite government R&D
Cerezyme no change despite falling costs Robert Desnick and the Fabry gene delaying the
cure
TKT and the failed promise of biotechnologycompetition
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The endless promise of biotech
One protein, one disease, one cure the low-
hanging fruit for biotechnology Cancer, dementia, arthritis, sepsis, auto-immune
diseases result from a cascade of biochemical events
Targets galore, but validated targets a rarity
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Directed Research the government role
HIV/AIDS and the triple cocktail the most
significant medical advance of the last quarter of the20th century
Government spending 1985-1996 -- $10 billion
Industry spending 1985-1996 -- $3 billion Annual AIDS medication market today: $7 billion
From drug development through clinical trials thegovernment role was key
Abbott and Norvir
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$35 billion a year in Rx industry research
where does it go?
The Prontosil affair Sen. Estes Kefauver and the antibiotic cartel
Nexium, Aranesp, Celebrex, et al plus a change,
plus cest la mme chose
At least 50 percent of corporate R&D is devoted to
me-too drugs the NIHCM study
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New Drug Approvals 1989-2000Source: National Institute for Health Care Management
0
50100150200250
300350400450
500
New
Molecular
Entities
Modified
Drugs
StandardDrugs
Priority Drugs
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Accounting for the $800 Million
Over half is for time-value of money
R&D is an expense, not an investment The economists view: Investment or Internal Tool for
decision-making?
The accountants view: Cost or Investment
Current revenue pays for current R&D
Over half is for me-too drugs The Global Alliance study
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Prescription for Reform
Focus industrial R&D on innovation by:
Comparative clinical trials like ALLHAT Require comparative arm for FDA approval
Remove unnecessary R&D cost drivers like protein,
SNPs and gene patents
Targeted Research for government R&D
Patience and humility
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