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What’s The Cure for the High Cost of Drug Development?

Don Therasse505_SquareWritten by:
Don Therasse, M.D.
Executive Partner, YourEncore


One of the most controversial issues in healthcare today is the rising cost of brand name prescription drugs. There are several factors contributing to this, many of which are explored in our recent eBook, The Pharm-ers Almanac, which details 10 of the most significant trends shaping the pharmaceutical industry, from PDUFA VI renewal cycle to potential supply chain vulnerabilities.

Spending on prescription drugs rose 13 percent in 2014.[1] The reasons are complicated, but a few trends are contributing:

  • The cost to launch new drugs has skyrocketed. The Tufts Center in Boston estimates that it now costs $2.6 billion to develop and launch a new pharmaceutical[2].
  • Significant commercialization costs are amplified by increasing post-marketing safety requirements, such as long-term cardiovascular outcomes studies for diabetes treatments, as well as enhanced post-marketing safety surveillance activities.
  • Partially driven by 2012 FDASIA incentives, there has been an increase in development of therapies for rare diseases, which can cost up to $300,000 per course of therapy. To encourage development of drugs for rare diseases in children, FDASIA created a program that awarded companies a transferable Rare Pediatric Disease Priority Review Voucher if they receive approval for a rare disease therapy. It seems to have had an effect, with 64 percent of Biologic License Application (BLA) approvals in 2014 designated for orphan diseases[3]. The current number of treatments for these diseases remains small, but will likely grow with these incentives.
  • Biosimilars are not expected to have the same price impact as generic small molecule drugs. Since biologics are manufactured from living organisms, they cannot be copied exactly, making their production much more complex and subject to subtle, but potentially significant clinical differences. Rand Corp. estimates that biosimilars will cut prices only by 10 to 50 percent of innovator charges.[4]

How these rising costs ultimately impact the ability of patients to access them remains to be seen. Certainly the high costs of some treatments may compel payers to reconsider coverage criteria, making qualifying for these treatments more difficult. Should that happen, we hope to see more innovative approaches from pharma companies and payers (both public and private) that will help to ensure that all patients have access to the best treatments available.

These are just a few of the trends impacting the pharmaceutical industry included in the The Pharm-ers Almanac eBook from YourEncore. I encourage you download it.

The book is authored by Tim Franson, M.D., chief medical officer at YourEncore, immediate past president of the United States Pharmacopeial Convention and a member of the Critical Path Institute board of directors. Key contributors include myself; Joe Lamendola, former vice president of U.S. regulatory affairs for Bristol-Myers Squibb; and Peter J. Pitts, former Food and Drug Administration (FDA) associate commissioner.

About the author: Don Therasse is former vice president of global patient safety and bioethics for Eli Lilly & Company.

[1] USA Today, Skyrocketing drug prices leave cures out of reach for some patients


[3] CDER Rare Disease And Orphan Drug Designated Approvals and CY 2014 CDER Drug and Biologic Calendar Year Approvals

[4]The Cost Savings Potential of Biosimilar Drugs in the United States