[Ip-health] How to get to $2.6 billion in 2014 , comment on the Tufts cost study

Cancer Africa cancerafrica at gmail.com
Tue Nov 18 15:06:53 PST 2014


and so the chase on R&D cost mystery continues...

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*The force of an individual can be the defining architecture of a nation*
On Tue, Nov 18, 2014 at 2:54 PM, Jamie Love <james.love at keionline.org>
wrote:

> I fixed a couple of typos.
>
> On Tue, Nov 18, 2014 at 2:46 PM, Jamie Love <james.love at keionline.org>
> wrote:
>
> >
> > From :  http://keionline.org/node/2127
> >
> >
>
> DiMasi estimates an "Average out-of-pocket cost of $1,395 million" but what
> this figure represents is an estimate of the risk adjusted outlays on drug
> development, including the actual out of pocket costs claimed for his
> secret sample of drugs, adjusted for risk, then automatically adding 44.5
> percent of the risk adjusted number of pre-clinical expenses. To this he
> adds "time costs (expected returns that investors forego while a drug is in
> development) of $1,163 million".
>
> The words "average out-of-pocket" are misleading, for the following reason.
> They give the impression that a company actually spent $1.4 billion on some
> drug, and it was risky. But no company spent $1.4 billion a drug. The
> number is a combination of what they spent on the drug that was approved,
> and money spent on projects that failed, at least in theory. Here is my
> guess for what the elements of the $1.4 billion look like, based upon the
> slides that DiMasi presented today. I believe a reported outlay of $1 on
> clinical testing was adjusted for risk, so it is now counted as $3.5. To
> this, DiMasi adds and automatic 44.5 percent more, or $1.57, for
> pre-clinical spending. Now the $1 in clinical testing is counted as $5.06,
> to reflect the risk adjusted outlays on both clinical and pre-clinical
> testing. So, the $1.395 billion in "out-of-pocket" expenses probably looks
> something like $276 million for clinical trial expenses, $690 million is
> risk adjustments for the clinical investment, bringing the total to $966
> million. Add in 44.5 percent, or $430 million for pre-clinical expenses,
> which may or may not have been incurred, and you have $276+$690+$430 =
> $1.395 billion (rounding suppressed)
>
> So which number sounds more impressive? "$276 million, plus adjustments for
> risk?" Or $1,395 billion in "average out of pocket" expenses? This is one
> way that the study was designed to confuse people who do not have the
> capacity or time to unpack the numbers.
>
> Then there is the issue of the cost per patient. If the average number of
> patients in trials is 5,000, the average cost per-patient will be $55,200
> per patient, a number that is not credible as an average, based upon data
> from third party sources. But now I'm guessing. Joe DiMasi knows what these
> numbers actually are. Eventually, we will see them, after the $2.6 billion
> number is burned into our brains. Tufts says the full study will be
> available, but not until some time next year.
>
> But what else can I say about $276 million as an average for clinical
> testing? The entire IRS outlay for the orphan drug tax credit was less than
> $650 million in 2010, and that year the FDA gave 195 Orphan designations
> and 14 marketing approvals. If clinical testing outlays were really as high
> as DiMasi says, the IRS outlays, while growing, would have been nearly an
> order of magnitude larger.
>
> And finally, there is the final boost in the numbers from the "time costs."
> This is $1.163 out of 2.558 billion. How does the cost estimate now look?
> You $1 in clinical testing costs (at some huge per-patient costs that are
> secret for now) becoming $3.5, after adjustments for risk. Then you add in
> the $1.57 for automatically assumed pre-clinical costs (44.5 percent of the
> $1.57), which adds to $5.06. Then you add in $4.22, for finance charges
> (long estimated development times, financed at inflation PLUS 10.5
> percent), and you get $9.28. That how you get to $2.6 billion, in 2014.
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