Contemplate the complete cost of pharmaceutical development

12/01/2003

By Hank Rahe

Newspaper headlines read healthcare costs are out of control while Americans are asking how drug companies can sell drugs cheaper outside the United States.

The answer is a complex matrix of factors relating to the total cost of pharmaceuticals, including: basic research, development, manufacturing and marketing. But forecasting the speed-to-market in an industry with regulatory hurdles is like handicapping a turtle race. Each of the categories involved in the delivery of a new drug substance to the consumer has specific rules and regulations involving cost of compliance.

As the new drug substance is navigated along the path, competitors are moving with a similar substance in a race to be first to market. The prize for winning this race is significant, with the winner receiving the majority of market share and the second-place finisher finding it exceedingly difficult to recover from the cost of entry.

As the race begins, a number of competitors may have discovered a base compound that shows indications of providing relief and/or a cure to an illness. Companies sort compounds by the thousands to identify the active substance that brings the relief or cure.

Following the initial sort, several candidates may emerge and each will go through a screening to determine the compound's advantages. Many candidates fall out of the race after initial screening due to adverse effects, such as toxicity. Regulatory controls on testing in the United States have helped to define a path that allows only drug substances to move forward into the next phase of testing.

Years of phased testing, starting with laboratory chemical evaluation to the ultimate clinical testing in humans, involves defined steps to protect both the workers and the individuals who will be involved in the clinical trials of the drug substance.

One in thousands of drug substances tested actually pass the chemical evaluation phase. As the compound moves through the testing maze, well over 90 percent are eliminated on this multi-year journey.

The regulatory requirements involve thousands of pages of documentation, which must be prepared, reviewed and submitted to the regulatory agencies. The agency then spends thousands of hours reviewing results, looking for possible areas where additional information will help to assure that the drug substance is not only effective but also safe for the end user and the environment.

In many cases, to manufacture the new drug substance involves complex chemical or biological steps requiring that millions of dollars be spent on facilities. These facilities must be built and ready to go when the new drug substance is approved, all adding to the risk of finishing the race in second place.

Marketing and advertising are the final cost factors, with drug makers hit with yet another set of regulations as to how and to whom the product can be marketed.

This all adds up to billions of dollars being spent by research-based pharmaceutical companies. Bottom line is that these companies are the risk takers and should enjoy the benefit of their efforts by covering their cost plus a reasonable profit.

The pricing structure is a complicated combination of factors; and all things considered, pharmaceutical companies have a greater chance of hitting the lottery than bringing a new drug substance to market based on current industry statistics. All of these factors must be considered when looking at the cost of pharmaceuticals.

Hank Rahe is director of technology for Containment Technologies Group and is a member of the CleanRooms Editorial Advisory Board. He can be contacted at: [email protected]