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TUFTS $200 MIL. DRUG DEVELOPMENT STUDY WILL BE UNVEILED APRIL 19; PMA IS BUILDING LIBRARY OF STUDIES TO COUNTER "PSEUDOFACTS" ABOUT DRUG BUSINESS

Executive Summary

The Tufts Center for Drug Development is preparing to unveil its $200 mil. estimate for the cost of R&D on a successful drug at a press conference in Washington, D.C. on April 19. The study, authored by Tufts assistant professor of economics Joseph DiMasi, PhD, has been underway for two years. The mid-April publication of the results assures that it will have a lead in getting the public attention to other work being undertaken in the cost of drug research -- primarily the Office of Technology Assessment study undertaken late last year at the request of Rep. Dingell (D-Mich.) and Rep. Waxman (D-Calif.). Pharmaceutical Manufacturers Association President Gerald Mossinghoff noted the relevance of the upcoming Tufts study to the continuing debate on drug costs and prices at the association's annual meeting in Boca Raton on April 3. "Chairman Waxman says every time I talk with him that he does not believe our estimate of $125 mil. to develop a new drug," Mossinghoff observed. "Well, he is right; it is incorrect. It costs $200 mil. to develop a new drug," Mossinghoff declared. Mossinghoff attacked Waxman's position that drug research costs are overstated as one of a series of "pseudofacts" (beliefs "erroneously regarded as facts") that the industry has to overcome in policy debates. The Tufts study was previewed at a Dec. 20 meeting held by the Institute of Medicine at the end of last year. At that meeting, Duke professor Henry Grabowski, a principal investigator for the study, reported that the estimated lab-to-approval time for a new drug in the mid-1980s had risen to almost 12 years from about 10 years a decade earlier. Grabowski also contended that the search for more treatments for chronic diseases was having an effect on lengthening development times ("The Pink Sheet," Jan. 1, p. 3). In addition to the Tufts study to update the cost of research debate, PMA recently commissioned a series of studies on the use of drug formularies by states and is soon expecting release of a study conducted by the National Pharmaceutical Council on effects of incremental R&D advances on health care. The NPC study is designed to respond to charges that drug R&D spending is mostly aimed at products with little benefit or improvement over existing therapies. Those allegations recently have been made most forcefully and persistently by Arkansas Democratic Senator Pryor. "You can listen to any tape of Sen. Pryor's hearing or any of his speeches on the Senate floor," Mossinghoff said, and it is clear that "the me-too drug syndrome is back..." The PMA president countered the charges of me-too research by questioning one of the primary determinants of duplicative research -- the FDA approval classification system. Mossinghoff questioned the assumption that the FDA "triage system" of approval classifications (1A, 1B, 1C) somehow measures the quality of a new drug. "I agree with the chairman of the board, John Lyons [Merck], that this industry should never have let the FDA get by with that [rating system]," Mossinghoff said. He called it "purely an illegal kind of classification." Of the 20 most prescribed brandname drugs in 1989 that received a new chemical entity rating from FDA, Mossinghoff showed that only one of those products, Mevacor, was deemed by the agency to be a 1A drug with a significant therapeutic benefit. Mevacor ranked 15th on the list in terms of number of prescriptions. To dramatize his point, Mossinghoff pointed out that Newsweek cover-pill Prozac was rated a 1B by FDA as a modest therapeutic advance. "There is no basis in the world for these classifications," Mossinghoff said. The PMA president also countered the charge that the drug industry sales increases have been outstripping R&D commitment. Using two index values for R&D spending in 1980 and the Consumer Price Index-prescription drug cost at the same year, PMA maintains that rate of R&D spending has increased about 50% higher than the cost of drugs. Outgoing PMA Chairman John Lyons noted that the cumulative spending by PMA members on drug R&D in the 1980s was $42 bil. For the upcoming decade, 1990-1991 PMA Chairman Richard Kogan (Schering-Plough) forecast a cumulative total of $130 bil. Kogan also cited figures calculated by the Battelle Medical Technology & Policy Research Center to argue the historical cost effectiveness of drugs. In the case of coronary heart disease, for example, the Battelle study calculates "that the medical treatment of ischemic heart disease and hypertension control accounted for 10% of the reduction in mortality between 1968 and 1986." Based on that reduction, "it was estimated that 671,000 lives were saved during this period." Battelle translated that into a cost figure of $83.6 bil. in averted costs. For cerebrovascular disease, Kogan cited Battelle calculations that about 456,000 deaths were avoided between 1970 and 1986 and between 2.6 mil. and 6 mil. non-fatal strokes were avoided. A savings of $16.3 bil. in indirect costs was attributed to those changes. Similarly, Mossinghoff compared the costs of some drugs recently faulted for high prices against the costs of alternative treatments. Annual drug therapy with Ciba's Actigall, for example, costs about $1,500. The comparative surgery price is $4,000. Hospitalization for schizophrenia can cost about $90,000 per year, 10 times the price of treatment with the Sandoz product, Clozaril. Sandoz has "a wonder drug to treat schizophrenia," Mossinghoff noted. "You may have read a lot about this recently: $9,000 annually. The estimate of the Maryland Health Department for hospitalization is $90,000," Mossinghoff said, "a 10-fold increase, and yet all you read about this wonderful drug is the$9,000." While enthusiastically pursuing cost efficacy approaches, the drug industry as a group has been reluctant to support immediately a state program undertaken by Oregon to build in technology assessments and outcomes research into the delivery of Medicaid benefits (see following story).
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