Cost of Pivotal Trials for New Drugs

By October 1, 2018 Commentary

One of the arguments used by the drug industry to justify high prices is the cost of developing a new therapy.  That obviously doesn’t explain the ludicrous price increases we see from the industry, but lets just stick to the price of a new drug.  A new analysis in the Journal of the American Medical Association Internal Medicine finds that, while not cheap, pivotal trials don’t appear to cost nearly as much as the drug industry would like us to believe.   (JAMA Internal Medicine)   These pivotal trials, often referred to as Phase III, are needed to be able to file a New Drug Application with the FDA and secure approval for marketing.  These are typically the largest trials for the compounds and assess both safety and efficacy.  The study included 59 therapeutic agents approved between 2015 and 2016, for which 138 pivotal clinical trials were conducted.  Cost was estimated using a standard industry tool  There was a substantial range in cost, over 100 times, with the median being $19 million.  Half of the trials had costs between $12 and $19 million.  Size of the trial was an obvious factor, as trials had from 15 to 8000 patients.  Orphan drug pivotal trials, with the small patient sizes and no control group, cost as little as $5 million.  A very large non-inferiority trial with clinical endpoints cost an estimated $345 million.  Trials with no control group or no comparator drug group tended to cost almost a third less than trials with those features.  Also, trials with longer trial and follow-up periods and with true clinical outcome endpoints had much higher costs.  It is important to note that drugs with only incremental effects or improvements tend to require the largest, and therefore most expensive, trials, but do we really need many of these anyway?  In general, this analysis makes me very leery of the very large development cost estimates we see for new drugs, and suggests that those with the most clinical improvement probably have the lowest development costs and therefore should have the lowest introductory prices, but don’t count on that.

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