A New, High Estimate of Drug-Development Costs (From an Unlikely Quarter)

A friend of the Curve sent along this Arnold-funded work by ATI Analysis that looked at each of the 10 medicines selected by CMS for price controls. It’s a fascinating read.

Much of the content is just a rehash of established sales and volume information for the 10 meds, but the report also throws a twist in: it estimates the spending on R&D for each drug.

The R&D spending numbers are big. Like, really big, ranging from $1.4 billion for Imbruvica to $7.8 billion for Xarelto. And the analysis accounts for post-marketing spending, too, adding an additional level of granularity.

The methodology here, from Evaluate Pharma, isn’t novel, but I haven’t seen it deployed on this scale. They essentially count the number of patients in each trial and multiply that number by a per-patient cost to get the total.

That methodology comes up with spending figures that are a lot higher than the typical numbers. The ATI piece says that past estimates have settled between $1.5 billion and $2.3 billion, but some oft-cited figures go to $2.9 billion (2013 numbers, adjust for inflation as you wish).

Here’s the thing, though. Most of those other estimates are “capitalized” … they account for spending on medicines that fail in trials and never make it to market. (Looking at spending only on marketed medicines introduces some pretty serious survivorship bias.) But the ATI numbers don’t make that adjustment, so they are, in some ways, an underestimate.

R&D spending is a fraught topic. Even though industry, by and large, doesn’t even imply that the cost of development is related to the price of medicines, there has been a longstanding debate about exactly how much drugmakers spend to get a medicine on the market, with critics lowballing that number and others pointing to the billions being invested.

There’s no “right” way to think about the topic, but these are worthwhile datapoints in any discussion about pharma’s R&D investment. Because if the folks at ATI, and their funders, think that industry is pouring billions into development, that’s a pretty strong sign that the industry is pouring billions into development.

• I hadn’t seen this Pfizer webpage on the company’s objections to the IRA (focused on the pill penalty and post-marketing research) before. Anyone have the backstory?

• The impact of the increasingly certain government shutdown on the health policy world -- especially IRA implementation -- is going to be an Inflection Point one of these days. For now, though, I should just point out that reporters are starting to sniff around, as evidenced by this Bloomberg Law piece.

• JAMA is all over the IRA this week, with one Viewpoint giving a broad overview of the law’s impact on heart-disease patients, especially the price-control and the out-of-pocket cap. Another looked at the lawsuits, objecting to the tactics but nonetheless concluding that a Supreme Court review “seems inevitable.” But are explicit in their support of the law.

• This Barron’s piece on how weight-loss drugs “could break the healthcare system” seems pretty overdone. I mean, we’re spending $40 billion+ a year on TNF inhibitors, and the system doesn’t seem to have broken. (I mean, the Humira biosims market is a little broken, but I don’t think that’s the kind of “broken” that Barron’s is talking about.) This is probably a sign of the kind of breathless coverage we can expect to continue to see.

• There was a House subcommittee hearing on the IRA, which is a little awkward, given that the IRA is already law, and Congress isn’t really considering any fixes (right now, anyway). Bio.news has the best coverage of how things went down.

This is an instructive exchange -- between PCMA’s PC Scott and Rep. Jake Auchincloss -- on what PBMs think about eliminating cost-sharing based on list price. Scott pretty much throws health plans under the bus, an argument that Auchincloss doesn’t find very compelling.