Monday, May 19, 2003

Biotech

Drug development price tag nears $900 million, according to Tufts study

By Dyke Hendrickson

It now costs $897 million to bring a drug to market.

This eye-opening sum was reported recently by the Tufts Center for the Study of Drug Discovery.

In 2001, the center reported that it took $802 million to bring a candidate from the pre-clinical stage to the marketplace. In just two years, the cost has increased close to 12 percent.

"Drug development remains a time-consuming, risky, and expensive process," said Tufts Center Director Kenneth Kaitin, in a statement.

"To mitigate rapidly rising R&D costs, pharmaceutical firms over the past decade have aggressively sought to identify likely drug failures earlier in the development process. These efforts appear to be paying off, as the rate of late-phase terminations in the 1990s declined, compared to the 1980s."

Still, costs are rising steadily.

The news of the increase, though not unexpected, is hardly welcome. Hundreds of biotech and pharma companies throughout New England are struggling to commercialize drug candidates.

Suggested causes for the increase to nearly $1 billion vary, from more FDA regulations to larger drug trials (number of patients).

Warren Stern, senior vice president of scientific and medical services at Waltham's Parexel International Corp., which outsources trials for pharmaceutical, biotech and medical device companies, said, "Over time, the FDA has made increasing demands of companies. They are asking for more information.

"Also, the general inflation in wages and other personnel costs" has forced costs to rise.

The Tufts study says that in 1991, the average cost to develop a new drug was $318 million (in year 2000 dollars).

A second reason given for the increase is the size of clinical trials.

"Many companies are investigating life-style drugs," said Pravin Chaturvedi, chief executive of Scion Pharmaceuticals Inc., a Medford biotechnology company. "Companies want to develop the next Viagra, or a drug for Alzheimer's.

"These are not life-threatening conditions, and they require more participants in the clinical trial. You need a very large patient database."

Industry statistics state that the average clinical drug trial costs about $8,000. The cost for multiple trials can be significant, especially for those large trials.

Joseph DiMasi, director of economic analysis at the Tufts Center, said, in a statement, "Among (the reasons for the increase) are a greater emphasis on developing treatments for conditions associated with chronic and degenerative diseases, increasing clinical trial sizes, rising subject recruitment costs, and more procedures performed per subject."

The Tufts study has become a national standard by which investors and tech company executives base many of their economic projects.

The study was based on an analysis of data covering 68 drugs from 10 multinational, foreign- and U.S.-owned pharmaceutical companies during the 1990s. Included were products that won or failed to win marketing approval, as well as products still in development.

Another finding of the survey was that only 21.5 percent of drugs that begin Phase I human trials are eventually approved for marketing.

The increasing costs of drug discovery means that younger companies will be under increased financial duress.

In the late '90s, many biotech enterprises were able to raise money through initial public offerings. With this money, they bought themselves more time and/or had more leverage with acquisitive pharmaceutical companies.

The odds of a biotech now raising close to $1 billion, even over a decade, are not good.

As a result of rising costs, biotech companies and large pharmas are finding increased use for each other.

A biotech company often will permit itself to be absorbed, because the pharma has the money to bring a drug to market.

And pharmas are increasingly interested in biotech firms, especially if they have a product in advanced human trials.

Industry analysts say the pipelines of most pharmas are near empty, and corporations are looking at smaller, creative biotechs to supply them with promising drug candidates they can commercialize.