High prices of oncology drugs aren’t justified by R&D costs

The high prices of new oncology drugs can’t be explained by R&D costs, with drug sales revenues being 15 times greater than the amount spent on development, a new study shows.

While the pharmaceutical industry typically cites costs of up to US$3 billion to bring a new drug to market, a new WHO-backed analysis finds the median R&D cost for a new drug to be US$794 million.

And even using the industry’s high estimates of R&D costs, drugs such as rituximab, trastuzumab and bevacizumab bring in around $30 for every dollar that went into their R&D, researchers say.

In a review of sales revenues of 99 drugs approved by the FDA since 1989, they found that overall oncology drugs generated an average return of US$14.50 in income for every dollar of R&D spending.

Published in JAMA Network Open, the study showed that half (49%) of the recently approved cancer drugs had sales of more than US$5 billion and five blockbuster oncology products had cumulative sales over US$50 billion (see table).

Based on pharma company financial statements, the researchers found that the cumulative drug sales income ranged fromUS$3.3 to US$55.1 per dollar of total risk adjusted R&D costs.

It took an average of five years for a drug to recover the cost of R&D, but many products – especially biologics – continued to generate substantial revenues for a long time after they lost market inclusivity.

The researchers pointed to the example of filgrastim, which had US$4 billion annual sales revenue even after coming off patent in 2015.

They said the “supernormal” returns on investment could not be justified when patients were unable to access new cancer therapies because of high prices, especially when drug production costs were low.

Excessively high incomes from cancer drugs also distorted research priorities by encouraging industry to focus on developing drugs for niche areas that had little or no additional clinically meaningful benefit, they write.

“Companies seem to have adopted a derisking strategy by duplicating and pursuing marginal indications, with the expectation that the market would continue to bear the high prices irrespective of the magnitude of benefits in the name of innovation.”

“Furthermore, it could be argued that the returns from cancer drugs have been so high that they might have overincentivised the pharmaceutical industry to dedicate substantial, perhaps disproportionate level of investment toward the R&D of cancer drugs, possibly at the expense of research in other disease areas,” they add.

“Lowering prices of cancer drugs and facilitating greater competition are essential for improving patient access, health system’s financial sustainability, and future innovation,” they conclude.


Cumulative sales revenue for blockbuster oncology drugs:

Rituximab   – US$93.7 billion

Trastuzumab   – US$88.2 billion

Bevacizumab   – US$83.4 billion

Pegfilgrastim   – US$64.0 billion

Imatinib   – US$63.8 billion

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