A new report estimating the cost of developing a medicine has been attacked by the United States consumer group Public Citizen for being an over-calculation. The report, released by the Tufts Center for the Study of Drug Development, Boston, estimates the expense at $802 million in FY00 dollars—a major increase on their last estimate in 1991 of $231 million in FY87 dollars. Public Citizen claims today's costs are closer to $240 million.
The Tufts data was compiled from a survey of 10 pharmaceutical companies. The analysis ranged from the cost of preclinical research to the expense of clinical studies using a sample of randomly selected investigational compounds. However, Bob Young, Research Director at Public Citizen, claims that the drugs chosen were not "...representative of new drugs because none received any support from government during development." He says that most drugs receive some government backing if only at the basic disease research stage.
Young also claims that the clinical costs are overblown. "This report puts them at $282 million after tax whereas congressionally mandated research shows that clinical trials cost $75 million on average. And according to the drug industry's own trade association, the Pharmaceutical Research and Manufacturers of America, clinical trials accounted for only 29% of all industry R&D expenses in 1999, the latest year for which such data is available," he says.
Ken Kaitin, the director of Tufts, responds that Public Citizen is basing its assessment of clinical costs "on an old report that harps back to orphan drug trials, which are much smaller than the regular trials." He adds, "The bigger the trial, the more expensive the clinical aspect, and these days much R&D involves multicenter trials." The clinical research phase has seen the biggest increase in costs since the last Tufts study a decade ago and Kaitin points to more expensive monitoring equipment and expanded regulatory requirements such as the determination of drug effects on long QT syndrome, a parameter which it has been necessary to record since the downfall of the diet drug, dexfenfluramine.
Another criticism is that half of the $802 million sum is an "opportunity costs of capital" factor, corresponding to the amount of money that pharmaceutical manufacturers have tied up in R&D that could be invested to make money. Kaitin's reply is that all businesses prepare financial statements in this way and that they also use pre-tax figures—Young argues that companies are able to deduct 34% tax from their R&D costs.
The Tufts Center is affiliated with Tufts University. It receives 65% of its funding in the form of unrestricted research grants from the pharmaceutical industry. Kaitin emphasizes that this is a no-strings-attached funding system and that industry does not direct the group's research agenda. A copy of the Tufts report can be seen at http://www.tufts.edu/med/csdd/ Nov30CostStudyPressRelease.html.
