Estimating the Clinical Cost of Drug Development for Orphan Versus Non

Jayasundara et al. Orphanet Journal of Rare Diseases (2019) 14:12 https://doi.org/10.1186/s13023-018-0990-4 RESEARCH Open Access Estimating the clinical cost of drug development for orphan versus non-orphan drugs Kavisha Jayasundara1*, Aidan Hollis2, Murray Krahn1,3,5, Muhammad Mamdani1,4,5, Jeffrey S. Hoch1,4,5,6 and Paul Grootendorst1 Abstract Background: High orphan drug prices have gained the attention of payers and policy makers. These prices may reflect the need to recoup the cost of drug development from a small patient pool. However, estimates of the cost of orphan drug development are sparse. Methods: Using publicly available data, we estimated the differences in trial characteristics and clinical development costs with 100 orphan and 100 non-orphan drugs. Results: We found that the out-of-pocket clinical costs per approved orphan drug to be $166 million and $291 million (2013 USD) per non-orphan drug. The capitalized clinical costs per approved orphan drug and non-orphan drug were estimated to be $291 million and $412 million respectively. When focusing on new molecular entities only, we found that the capitalized clinical cost per approved orphan drug was half that of a non-orphan drug. Conclusions: More discussion is needed to better align on which cost components should be included in research and development costs for pharmaceuticals. Keywords: Cost of drug development, Orphan drugs, Rare diseases Background replacement therapy to treat Gaucher’s disease, might In recent years, pharmaceutical companies have increas- cost as much as $400 000 USD per year for an adult patient ingly focused on developing drugs for rare diseases [1]. [5]. A drug that treats paroxysmal nocturnal hemoglobinuria, This is partly due to technical advances that facilitate eculizumab, can cost up to US $500,000 per patient per year the identification of the genetic causes of rare diseases [6]. Kalydeco, used to treat a subpopulation of cystic fibrosis [2]. Country level initiatives and incentives for the devel- patients, exceeds $300,000 USD per year per patient [7]. opment of drugs that treat rare diseases, i.e. orphan Some believe that pharmaceutical companies price drugs drugs, have also stimulated research efforts in this area. monopolistically, protected by patent rights, to maximize Since the launch of these initiatives, more than 400 or- their profits [8, 9]. Others believe that the high prices for orphan drugs have been approved [1]. Orphan drugs have phan drugs simply allow drug research and development large revenue generating potential, in part because of (R&D) and production costs to be recouped from a relatively their high prices [3]. The global orphan drug market is small patient pool. Thus, according to this perspective, drug estimated to reach US $209 billion by 2022 accounting prices should be regulated, at least in part, on the basis of for 21.4% of total branded prescription drug sales [4]. R&D and production costs. As the number of approved orphan drugs increased, For those interested in engaging in cost-based pricing, the high prices associated with some of them have be- evidence on R&D costs is essential. Moreover, know- come the topic of much debate. Imiglucerase, an enzyme ledge of the cost of drug development is useful when assessing public policies aimed to stimulate drug devel- * Correspondence: [email protected] opment and foster innovation [10]. However, to our 1Leslie Dan Faculty of Pharmacy, University of Toronto, Toronto, Canada knowledge, there are no estimates in the literature of the Full list of author information is available at the end of the article © The Author(s). 2019 Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. The Creative Commons Public Domain Dedication waiver (http://creativecommons.org/publicdomain/zero/1.0/) applies to the data made available in this article, unless otherwise stated. Jayasundara et al. Orphanet Journal of Rare Diseases (2019) 14:12 Page 2 of 10 cost of development of drugs that treat rare diseases. Drugs@FDA website. We created a “restricted” dataset DiMasi et al estimated the out-of-pocket cost per approved that only included information from the product mono- new compound developed in house by US pharmaceutical graphs and FDA review reports. The “All data” dataset companies to be $1.4 billion and the capitalized costs to the included trials that were obtained from clinicaltrials.gov point of marketing approval to be $2.6 billion (2013 USD) for the same indication but may not have been used for [11]. These estimates were derived from the results of con- the approval of the drug in question. fidential surveys of 10 US pharmaceutical companies and Next, we calculated the average cost per trial, by trial includes both clinical and pre-clinical costs. A more recent phase, for both groups of drugs. This was the product of studybyPrasadetalhasestimatedthecostofdevelopinga the average number patients enrolled and the average cancer drug to be $648 million (out-of-pocket) and $757 cost per patient, again stratified by phase and drug million (capitalized) in 2017 USD dollars [12]. These results group. For non-orphan drugs, the average clinical trial were based on an analysis of US Securities and Exchange site-based costs per patient by trial phase was obtained Commission filings for 10 drug companies. The three-fold through a publicly available data source in 2013 USD difference in these R&D cost estimates complicates [15]. These per patient costs include costs related to in- cost-based pricing discussions. vestigator and site (institutional overhead, ethics review), In this study, we aim to identify the differences in clin- recruitment costs, screening, general trial procedures, ical trial characteristics between orphan and non-orphan materials (drug supply, comparator drugs), efficacy as- drugs using publicly available data and use that informa- sessments (MRIs, CT scans), laboratory procedures tion to estimate the clinical R&D costs for both orphan (local lab fees, shipping of samples), site-based data and non-orphan groups. As much as updating estimates management and any site-specific contract research of cost of drug development using transparent and re- organization costs. We utilized data from a report by producible methods is important, our main objective EvaluatePharma to calculate the per patient cost for was to better understand the difference between these phase 3 trial for orphan drug trials and non-orphan drug costs for orphan and non-orphan drugs. trials [16]. These estimates resulted in a ratio of per patient costs for orphan: non-orphan of 2.5:1. Given the Methods similarities in phase 2 and 3 study designs, we assumed A detailed version of the methods can be found in the that the same ratio for phase 2 trials. The per patient Additional file 1. We have summarized our methods below. costs for phase 1 trials were assumed to be the same for We randomly selected one hundred orphan drugs ap- both orphan and non-orphan groups. proved by the United States Food and Drug Administra- Using the methods used by DiMasi et al [11], we then tion (FDA) between Jan 2000 – Dec 2015 using the FDA calculated the expected trial costs for each group based Orphan Drug Database [13]. Similarly, we randomly se- on the average phase-specific trial costs and phase tran- lected one hundred non –orphan drugs approved in the sition probabilities. The transition probabilities for both same time period using the Drugs@FDA database [14]. groups were obtained from Hay et al [17] who reported FDA approvals for a new indication of an already mar- on probabilities for both orphan drugs and all drugs. In keted drug were included in our analysis. Approvals re- the Hay et al analysis, the proportion of orphan drugs lated to new formulations, new manufacturers or new varied from 6% to 15% depending on the clinical stage dosage forms were excluded. of development. For the purpose of our analysis, we used For both the orphan and non-orphan drugs identified, the transition probabilities for all drugs reported by Hay clinicaltrials.gov was searched for all related clinical tri- et al for the non-orphan group. als for the approved indication. These data allowed us to These expected costs and overall probability of success record the number of trials, number of subjects enrolled for orphan and non-orphan drugs were then used to cal- per trial, and trial duration, by trial phase. We catego- culate the expected out-of-pocket costs per approved rized phase 1/2 trials as phase 1, phase 2/3 as phase 2 drug for the two groups in 2013 USD. Costs were then and bioequivalence studies as phase 1. Trials that did capitalized at 10.5% per annum over the duration of the not report on trial phase were randomly allocated into clinical phase testing and regulatory approval period. phase 1-3 in the same proportions as studies with this This 10.5% discount rate was used by DiMasi et al in information. Trials with a start date after the FDA ap- their analysis of drug development costs over the period proval date and phase 4 trials were excluded. Data on 1994 to 2010 and is estimated using a variant of the cap- the source of funding and the age and sex of trial sub- ital asset pricing model. All costs were calculated in jects was also obtained from the database.

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