[Ip-health] The Office of Health Economics study

Jamie Love james.love at keionline.org
Sat Nov 15 22:14:16 PST 2014

The OHE study can be downloaded here:

This is from the Executive Summary:


Mean estimates of R&D costs per successful drug are useful in providing an
overall picture, but should be treated with caution. Important cost
differences exist across therapeutic areas, firm sizes and compound
origins. In addition, many of the cost estimates in the literature focus on
self-originated new compounds and exclude licensed-in compounds and
compounds that have been discovered and/or developed via alliances or deals
between companies, which are increasingly common. Other cost estimates do
not differentiate at all between self-originated and licensed-in compounds,
making it difficult to gauge their accuracy. These issues should be
factored in when drawing conclusions about R&D costs.

On Sun, Nov 16, 2014 at 12:40 AM, Dimasi, Joseph A. <Joseph.Dimasi at tufts.edu
> wrote:

>  Jamie,
> I would call your attention to the actual report. What you don't see in
> the slides are the basis for the statement. They based the notion about
> clinical success rates for licensed drugs on results presented in my own
> study. But, I explained to you in my message what the likely explanation
> was for the difference --- a statistical artifact based on how the dataset
> was constructed.  That point was mentioned in my paper, and it was also
> noted in the OHE report (although not in the slide).  In any event, for
> this reason, you cannot conclude from the results in my study that clinical
> success rates for licensed drugs are higher.  As for the early stage
> research mentioned, success meant only pushing things from preclinical into
> clinical testing, not ultimate approval.  In either case you really have to
> also know how many failures there were in the sector that effectively
> provides the drugs to be licensed (primarily the small firm sector).  We
> don't know that.
> What exactly was confusing to you about our paper?  I resent your slur
> about intent.  You have no basis for it, and it certainly isn't helpful.
> Joe
> --
> -----------------------------------------------
> Joseph A. DiMasi, Ph.D.
> Director of Economic Analysis
> Tufts Center for the Study of Drug Development Tufts University
> 75 Kneeland Street, Suite 1100
> Boston, MA 02111
> tel: 617-636-2116; fax: 617-636-2425
> URL: http://csdd.tufts.edu
> -----------------------------------------------
> ________________________________________
> From: Ip-health [ip-health-bounces at lists.keionline.org] on behalf of
> Jamie Love [james.love at keionline.org]
> Sent: Saturday, November 15, 2014 11:18 PM
> To: Ip-health
> Subject: [Ip-health] The Office of Health Economics study
> http://www.slideshare.net/OHENews/rd-cost-of-a-new-medicine-mestre-ferrandiz-19-jan2013
> This is a slideshow prepared by the Office of Health Economics (OHE) which
> recently published its own estimate of the cost of developing a new drug.
> The Office of Health Economics sounds like a government agency, but it is a
> consulting operation that mostly works for drug companies, like the center
> affiliated with Tufts where Joe DiMasi works.
> I liked the Jan 2013 study by the OHE, because the data was presented in an
> easy to understand way (compare to the 2003 DiMasi paper which reads as if
> it was designed to confuse people), and they gave a lot of useful cites to
> other studies. The OHE study estimated the cost of cash outlays to
> register a drug at $234.6 million (Slide 26), and the risk adjusted version
> of this at $899 million, including pre-clinical costs. (Slide 26). After
> adding an 11 percent real return, the total is $1.506 billion. (Page 27).
> I call Joe's attention to slides 31 and 32, which discuss the issue of
> licensed in compounds. Licensed in compounds have a higher success rate.
> In these models where risks drive costs, higher success means lower costs.
> I also liked slide 29, which reminds us of the dangers at looking at means
> (particularly when your sample is not representative of all approvals).
> This is why having more disclosure of the underlying data (something that
> DiMasi has not done in the past) is important.
> When Joe releases his new study this week, people may want to compare some
> of his parameters and assumptions with those in the OHE study. While both
> studies were designed to give policy makers the impression that drug
> development costs are high, the OHE study was at least designed so one
> could easily follow the methodology and test the assumptions.
> I will say from the outset that the notion that clinical trials are this
> expensive ($235 million ON AVERAGE in the OHE study) seems pretty far off
> the mark, but I look forward to hearing Joe or the OHE people try to
> justify this as an average, and give us some per patient numbers, for a
> reality check. In this regard, note that more than 60 percent of new
> cancer drugs qualify as Orphan Drugs, and have pretty small trials,
> according to the FDA medical reviews.
> Oh, and sometimes easy to forget, the Orphan Drug Tax Credit pays for half
> the cost of qualifying trials, which is a big subsidy for most cancer drugs
> these days, and these assumptions that companies spend a fortune on
> pre-clinical research don't make much sense when the NIH does the heavy
> lifting for early research (like, for example, several nibs).
> --
> James Love. Knowledge Ecology International
> http://www.keionline.org/donate.html
> KEI DC tel: +1.202.332.2670, US Mobile: +1.202.361.3040, Geneva Mobile:
> +41.76.413.6584, twitter.com/jamie_love
> _______________________________________________
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James Love.  Knowledge Ecology International
KEI DC tel: +1.202.332.2670, US Mobile: +1.202.361.3040, Geneva Mobile:
+41.76.413.6584, twitter.com/jamie_love

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