OTA TO STUDY DETERMINE Rx DRUG DEVELOPMENT COSTS

Executive Summary

OTA TO STUDY DETERMINE Rx DRUG DEVELOPMENT COSTS was requested Sept. 30 by House Commerce Committee Chairman Dingell (D-Mich.) and Health Subcommittee Chairman Waxman (D-Calif.). The legislators asked the Office of Technology Assessment to "undertake a study of the cost of researching and developing new prescription drugs." They characterized the study as "a major contribution toward a better understanding of our nation's pharmaceutical industry." While examining health issues and policies under the FD&C Act, Waxman and Dingell noted that "on a number of occasions . . . ranging from orphan drugs to prescription drug price increases to Medicare catastrophic drug coverage, an essential part of the committee's discussion has involved questions about the cost of researching and developing new prescription drugs." However, they continued, "there is little if any objective and reliable data on the R&D costs of new drug development." The Pharmaceutical Manufacturers Association currently says development costs run to $ 125 mil. per drug, a figure that takes into account the R&D costs of compounds that do not reach the marketplace. Individual pharmaceutical company executives have estimated the average drug R&D cost to be closer to $ 90 mil. In a 1987 report on the industry, SRI International estimated drug development costs to be in the $ 50-$ 75 mil. range. "The Rx industry's latest claim of an NCE [new chemical entity] average cost of $ 125 mil. [is] high by $ 50-$ 75 mil.," SRI projected. Dingell and Waxman noted that "there are some independent studies and some industry-developed data" on NCE development costs; however, "all have been severely criticized." Consequently, they said, "the committee's work is impeded by claims of the extremely high R&D costs of new drugs and countervailing criticisms of the accuracy of those claims. These conflicting assertions are constantly repeated, but neither can be verified by the committee."