January 30, 2008

The Costs of Pharmaceutical Innovation

Megan discusses clinical trials:

But clinical trials for a single successful drug cost $500 million, and not because the labs have outrageous administrative overhead. Even if the government were in charge of running them, they would still be on the hook for that $500 million,

What? I hear you cry.  There’s no way they can cost that much.

Having written software to help reduce the costs of drug testing, I can assure you that they can.  Here’s why:

  • Safety is of paramount concern here, and there are layers and layers of checks, balances, rechecks, spot checks, ethics boards, etc involved in making sure these tests are proper and well-structured.  That takes a lot of time, and a lot of people to make it happen.
  • There are 3 or 4 phases of drug testing.   The first two are fairly small groups, typically to test that the drug doesn’t have  violent side effects, and that it actually fixes the problem in some meaningful way
  • The 3rd phase is big – involving typically hundreds if not thousands of patients, dozens if not hundreds of doctors, ethics boards, referees, extensive evaluation periods and so forth.  And the Drug Company has to pay for all of this out of their own pocket.
    • Phase III is where the “statistically significant” analysis comes from.  Which means you have to have a statistically significant number of people from each population that can benefit from the drug.
    • Once Phase III is done, typically the drug can begin to be sold
  • Phase IV is not always mandated by the FDA, but if it is required, it will usually be bigger than Phase III, and linearly more expensive.     Because, again, it has to be a rigorously controlled statistically significant analysis.

Clinical trials are significant projects, like putting a building together.  You have to recruit doctors, you have to interview them, you have to get them trained up on your drug and side effects and so forth.  You have to establish protocols and procedures for them to follow.  You have to hire people to watch over the doctors, make sure they have their paperwork done in a timely manner, make sure they’re following the protocol, etc.  You have to hire labs to do blood tests and so forth on every patient the doctor recruits.

Many doctors don’t find many patients, and you have to go through the effort of finding more doctors and more patients in order to get a sufficiently large sample.   Then, of course, you have to watch these trials proceed for a year or more in order to gauge short and long-term side effects, efficacy, interactions with other drugs, etc.   Often you have to do this in multiple countries,  which adds significant cost to the process as well.  Many of these trials can take multiple years to complete, and you have to pay salaries along the way.

And usually, you have to do more than one Phase III trial, and show effectiveness in each before you can move on to the approval stage.   This is assuming you actually do, in fact, show effectiveness, and can gain FDA approval for your drug.  Because if you don’t… well then you can’t sell it, can you, and all the money you spent on the trial just went down the drain.

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