Drug makers often point to substantial research and development (R&D) costs as reasons for the high prices of innovator drugs, particularly in oncology. However, some stakeholders have expressed skepticism about whether R&D costs are indeed in line with the prices that drug makers charge. In a new study published in JAMA, investigators sought to compare sales of cancer drugs with estimated R&D costs.
Drug makers often point to substantial research and development (R&D) costs as reasons for the high prices of innovator drugs, particularly in oncology. However, some stakeholders have expressed skepticism about whether R&D costs are indeed in line with the prices that drug makers charge. In a new study published in JAMA, investigators sought to compare sales of cancer drugs with estimated R&D costs.
The investigators used annual financial reports from originator drug manufacturers for products approved between 1989 and 2017 to determine sales of the drugs; to calculate R&D costs, they relied on estimates presented in a 2017 study that calculated median risk-adjusted R&D costs of $794 million (range, $219 million-$2827 million). Of 156 drugs approved during the study period, 99 (63.5%) had sales data available and were included in the analysis. The median number of years that had passed since the market authorization of the products was 10 (range, 1-28).
In 2017, the median sales incomes across all included drugs was $435.2 million (range, $1.8 million-$8.2 billion). In total, 33 drugs (33.3%) had mean annual sales incomes of more than $1 billion, and 49 drugs (49.5%) had reached cumulative sales of over $5.0 billion.
Five products had accrued sales incomes of more than $50 billion, and 4 among them are biologics that face current or oncoming biosimilar competition: rituximab earned $93.7 billion, trastuzumab earned $88.2 billion, bevacizumab earned $83.4 billion, and pegfilgrastim earned $64.0 billion (the fifth product, imatinib, a small-molecule drug, earned $63.8 billion).
Among biologics in particular, financial returns continued to be substantial even after patent exclusivity ended. For example, even after losing patent protection and facing biosimilar challengers, the reference filgrastim continued to generate more than $500 million in sales each year. Pegfilgrastim, which did not face a biosimilar challenger until 2018 despite a loss of exclusivity in the United States in 2015, reported approximately $4 billion in annual sales.
Based on a risk-adjusted R&D cost of $794 million, by the end of 2017, $1 invested in R&D had generated a median $14.50 (range, $4.30-$55.10) in sales income for originator companies. Rituximab, trastuzumab, bevacizumab, and pegfilgrastim, respectively, brought in an estimated $33.20, $31.20, $29.50, and $22.60 for every dollar invested in R&D.
By the end of 2017, 73.7% of the drugs had fully recovered their median R&D costs. The median time to generate sales income to fully cover R&D costs was 3 years (range, 2-5).
“Our analysis has shown that incomes from the sales of cancer drugs greatly exceeded R&D costs,” write the authors, adding that, for biologics in particular, “these drugs would continue to accrue incomes in the hundreds of millions for the originator companies beyond the end of market exclusivity…this could be due to entry barriers for biosimilar products that restrict competition,” among other factors.
Reference
Tay-Teo K, Ilbawi A, Hill SR. Comparison of sales income and research and development costs for FDA-approved cancer drugs sold by originator drug companies. JAMA Netw Open. 2019;2(1):e186875. doi: 10.1001/jamanetworkopen.2018.6875.
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