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Executive Summary

OTA DRUG R&D COST PROJECT's FIRST PHASE WILL ASSESS CURRENT ESTIMATES of research and development costs and returns on investment, Office of Technology Assessment (OTA) Project Director Judith Wagner noted at the first meeting of the study's advisory panel held on Jan. 5 in Washington, D.C. OTA is initially focusing on a one-year effort for the study with a contingency for a second year, if required. The first year will be divided into two phases. In addition to collecting and "critiquing" current literature on R&D costs, the first phase will also involve designing a follow-up study further analyzing R&D cost data. OTA will broaden the study in the second phase to examine how R&D costs are changing and what type of policy "levers" are acting on those costs. OTA expects to complete the first year of the study in December 1990 and issue a report shortly thereafter. Former House Energy & Commerce/Health Subcommittee counsel William Corr spoke to the advisory panel to review Subcommittee Chairman Waxman's (D-Calif.) purpose in requesting the OTA analysis. Corr noted that rising drug prices are the basis for Waxman's concern. Congress is interested in an impartial assessment of R&D costs and how much those costs drive price increases, he said. Corr also pointed out that the issue of pharmaceutical R&D has been raised by industry during the development of virtually every important piece of drug legislation in Waxman's subcommittee in the past decade. He cited the Orphan Drug Act, the ANDA/patent term extension restoration act and the Medicare outpatient prescription drug benefit as examples. Sen. Kennedy (D-Mass.) also requested the OTA study. The advisory panel, which is chaired by Frederick Scherer of the Kennedy School of Government at Harvard, discussed issues to be considered following the presentations by Corr and Wagner. The panel includes three former FDA officials, including former Commissioner Charles Edwards and four drug industry representatives, as well as ex-PMA President Lewis Engman ("The Pink Sheet" Oct. 30, T&G-4). Summarizing key points raised by the panel at the close of the session, Scherer noted that the panel seemed to agree that a series of specific product studies would be useful. The question of whether the probability of market success rises with an increase in R&D spending was also raised, he said. In addition, Scherer commented, the panel expressed interest in an analysis of how R&D functions at different companies and how research into biotechnology drugs, both at small biotech firms and large traditional companies, is changing the R&D process. He concluded by pointing out that because the pharmaceutical industry is an unusually high spender on R&D, it would be important to assess what drives the spending -- whether, for example, it is the search for breakthrough products.

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