One rationale from the drug industry for the high prices and profits on drugs which make it to market is that it costs a lot to get any drug through clinical trials to approval and that the ones that are successful have to pay for a lot of unsuccessful candidates. The Biotechnology Industry Organization released a recent study looking at success rates for pharmaceuticals which were in any phase of development from October 2003 through December 2010. (BIO Study) The data included 4275 drugs for any indication and covered all drug and biotech companies, including private ones.
The overall success rate was only 9%, but was 14.5% for lead indications and 3.2% for secondary ones. New molecular entities had a lead indication success rate of 14%, non-NME success was much higher, at 41%. Biologics had a surprisingly high 26% success rate for lead indications. By disease, some example success rates for lead indications were 15% for infectious disease, 14% for endocrine, 13% for respiratory, 11% for oncology and only 7% for cardiovascular. Within oncology, which is responsible for much current drug development work, rates varied significantly by cancer, from 19% for head and neck to only 2% for non-small cell lung cancer.
Multiple submissions to the FDA were associated with ultimate success for a drug. The lead indication for a compound was approved 51% of the time on a first submission, but after additional trials, etc, by the time you got to five submissions, your success rate was up to 87%! Clearly, drug companies spend a lot of money on compounds that don’t make it through to commercialization. What is not clear is how much of this is due to poor compound selection or poor trial work. It is not all just bad luck. Whatever the research costs they must cover, the lack of competition due to patent exclusivities has clearly led to very high spending on many pharmaceutical and especially biologic products.