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Comment & Response
April 2018

Assessing Pharmaceutical Research and Development Costs

Author Affiliations
  • 1Tufts Center for the Study of Drug Development, Tufts University, Boston, Massachusetts
JAMA Intern Med. 2018;178(4):587. doi:10.1001/jamainternmed.2017.8703

To the Editor The Original Investigation by Prasad and Mailankody1 published in a recent issue of JAMA Internal Medicine and concerning cancer drug research and development (R&D) costs and revenues suffers from selection bias and other flaws that render their cost estimates substantially downwardly biased. The authors presume that they have adequately adjusted for risk because, aside from the single cancer drug each company had approved, the companies had a number of drugs in clinical development that have not been approved (they do not list these other drugs, specify whether they are cancer drugs, indicate whether they have failed, or what their development status is if they have not failed). Even if one assumes that all of the unapproved drugs fail, the data in the study by Prasad and Mailankody1 suggest an overall clinical approval success rate for these companies of 23%. This is substantially more than recent rigorously developed estimates of clinical approval success rates for drugs as a whole.2,3 One recent analysis4 puts the clinical approval success rate for oncology indications at 5%. If some of the drugs in development at these companies are approved in the future, thereby increasing the implied success rates, it would mark these companies as even more atypical for the period analyzed. Only one company (Exelixis) in the sample has an implied success rate (9%) that is roughly similar to established industry success rate estimates. The out-of-pocket R&D cost for the approved cancer drug manufactured by Exelixis (cabozantinib) listed in the article is $2.0 billion, and when capitalized at the (too-low) cost of capital rate Prasad and Mailankody1 used, the R&D cost estimate becomes $2.6 billion. Research and development costs associated with the purported failures are also likely underestimated since they could have incurred costs outside of the periods examined.

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