big pharma pricing and innovation

7/30/2019 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

big pharma pricing and innovation

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