[Ip-health] How transparency of the costs of clinical trials will improve policy making

James Love james.love at keionline.org
Wed May 22 06:22:49 PDT 2019


How transparency of the costs of clinical trials will improve policy making
May 22, 2019

Perhaps the toughest issue in the 72nd World Health Assembly negotiations
on a WHO transparency resolution concerns the proposal to require public
reporting of the costs of each clinical trial undertaken for development of
drugs, vaccines, cell- and gene-therapies and diagnostic tests.

The industry talking points against transparency of R&D costs used to begin
with the argument that it was impossible to allocate costs across various
products or services. The resolution however, focuses on clinical trial
costs, which can always be assigned to specific products or services.

The next line of attack by industry is that the costs would not include
failures, but this is a proposal to report on disclosures of costs for all
trials, regardless of outcomes, and the risks of failure can be and are
estimated from observable data on trials. Trial risk data is actually not
that controversial. For example, Joseph DiMasi’s 2016 estimate of a 0.118
likelihood of approval for drugs entering Phase I testing was not
criticized (even though his non-transparent cost data was).

The drug company talking points against having transparency of clinical
trial costs are that governments will draw the wrong conclusions from the
data, and will subsequently use simple cost plus pricing policies that will
create incentives to spend excessively on R&D (padding expenses whenever
possible), to over-reward inefficient companies and to under-reward the
most important innovations. These are real issues, but are also unlikely
outcomes from transparency, given the sophistication of analyses by various
stakeholders and experts.

The following are examples how a government might want to use clinical
trial cost information.

Comparative trials. Suppose one government or several governments
collaborating with each other want to fund independent comparative
effectiveness trials on a drug, or require drug developers to conduct the
trials, as a condition for marketing approval or reimbursement. Knowing
what it costs to conduct the trials will be important for budgeting the
expenditures or evaluating the burden on the company.

AMR incentives. Germany, the UK, Sweden, the US and many other countries
are exploring various incentive mechanisms to reward successful investments
in new antibiotic drugs, that de-link prices and volumes from the
incentives. These include large market entry rewards. So how large should
the market entry rewards be? Having data on trial costs (combined with data
on trial risks) for antibiotic drugs will be helpful in determining how
large a market entry reward will have to be in order to induce investments
in trials.

Pediatric Trials. Several industrialized countries grant patent extensions
as an incentive to invest in clinical trials involving pediatric
populations. These patent extensions can be very expensive for patients (as
explored in a recent JAMA article: doi:10.1001/jamainternmed.2018.3933). If
governments know what companies are spending on the clinical trials that
are rewarded with patent extensions, they can (and should) consider other
options for financing the trials, if the costs to the health system from
the extension are significantly higher than the expected trial costs (note
that the patent extensions are often available regardless of results of

Pricing of treatments for rare diseases. Extraordinarily high prices for
treatments for rare diseases are often tolerated because of an assumption
that the exceptionally high prices are necessary to recover R&D
investments. These investments are sometimes only the cost of trials, for
products or services were early research was done at government-funded
research institutions, such as research universities. The trials for rare
diseases are often small, and also benefit from tax credits and other
subsidies. If governments had better insight into the cost to the companies
of conducting the trials, they could more effectively challenge super high
prices, particularly after a company has reported earning significant
revenues on the high priced treatment. For example, countries could decide
that after earning a certain amount of money, worldwide, the price would
have to be lowered, since the justification of super high prices was always
based upon an assumption of high R&D costs and a small patient population
to cover those costs.

Cell and Gene Therapies. The new cell- and gene-therapies, such as the CAR
T treatments Kymriah and Yescarta or the gene-therapy Luxturna, are new
therapies, and governments are struggling to find a methodology for
pricing. These are not drugs, and the clinical trials are often quite
small. Kymriah approval in the USA involved just 63 patients. Novartis
claimed to have spent $1 billion on this technology (licensed from the
University of Pennsylvania), but Dr. Carl June, the inventor, put the costs
of CAR T trials at about $150,000 per patient, which would amount to a
trial cost of less than $10 million. The safety and efficacy of Luxturna,
an $850,000 treatment that was developed with NIH grants, were established
in a clinical development program with a total of 41 patients. Knowing the
actual costs of the CAR T and gene-therapy trials would allow governments
to more effectively question exceptionally high prices. At a conference on
the future of cell therapies held last week, speakers suggested some of the
new treatments would be approved after clinical trials with as few as 10
patients. Knowing more about the costs of these trials is very important as
governments struggle with prices for treatments for very small populations
of patents and for new technologies.

Bayh-Dole 35 USC 209 analysis. The United States Bayh-Dole Act, 35 USC
209(a), prohibits the use of exclusive licenses for federally funded
inventions, unless it can demonstrate that the exclusivity is “a reasonable
and necessary incentive to call forth the investment capital and
expenditures needed to bring the invention to practical application.” And
when exclusivity is allowed, the Act requires that “the proposed scope of
exclusivity is not greater than reasonably necessary to provide the
incentive for bringing the invention to practical application.” Knowing
what trial costs are is necessary for agencies like the NIH and BARDA to
comply with his law in good faith, and ensure the public is protected from
unnecessary or overly broad monopoly rights.

James Love.  Knowledge Ecology International
U.S. Mobile +1.202.361.3040
U.S. office phone +1.202.332.2670
http://www.keionline.org <http://www.keionline.org/donate.html>

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