Want to know why early drug development costs so much?


In a series of speeches, FDA Commissioner Scott Gottlieb, when referring to the high cost of drugs, has been pointing out that it is early drug development efforts that are setting the stage for more expensive drugs—and drug failures.  Is he blaming CDMOs?

“We’re on an unsustainable path, where the cost of drug development is growing enormously, as well as costs of new medicines,” the Commissioner said. “We need to …make the entire process less costly and more efficient.  Otherwise we won’t continue to realize the practical benefits of advances in science, in the form of new and better medicines.”

There is no question that he is absolutely right. As this chart published in the Journal of Healthcare Economics illustrates, early drug development—the part in which we CDMOs play a role by developing the active pharmaceutical ingredients (APIs) that will become tomorrow’s therapeutic—along with preclinical studies, make up more of the drug development budget than all the filings and human clinical trials combined.

Can we make drug discovery more efficient?

We would like nothing better than to improve efficiency, but drug discovery and development remains a risky, multi-year effort.

It begins with the long process of developing an API, with failure likely to occur at each forward step.  For that, pharmaceutical companies will spend from $.5M to $1.5M or more just for one API early development.  Of the 9 companies we signed up recently and for whom we will develop an API, only 1 in 6 is likely to return for additional GMP manufacturing.  Their preclinical studies may look good, leading to a Phase I clinical trial.  That trial meets its endpoints and maybe they move to a Phase II study. It could end there for various reasons or go on to Phase III and fail there.

To make this a more efficient process, we and the entire industry are putting in a great deal of work into improving those odds from 1 in 6 to maybe 2 in 3 successful products.  For that to happen we need new technology and innovation, new techniques in computer science and data analysis—and these have to be deployed even before a pharmaceutical company comes to us to develop an API. 

Drug discovery will continue to be costly – here’s why

All of the 9 new projects we signed will require us to develop new chemistry.  We have to do just as much work whether it’s a small project or whether we’re producing material for a Phase I or Phase II trial.  New chemistry has to be developed for every single project. That is challenging, time consuming and expensive. Our operation would be far more efficient if we could produce the same product in larger volumes.  If we could get to the point of being a little more repetitive, like chemical manufacturing, making the same thing every day, costs would be reduced.

Our industry is inching toward achieving that goal.  It’s coming, but we have a long way to go.

Why the cost of early stage development has grown at a proportionally faster rate than late-stage drug development.

Commissioner Gottlieb noted that early drug development costs have risen more than those for late-stage drug development.  Part of the reason is due to his own agency, the FDA, which has raised the bar substantially.  A decade ago sponsors could get cheap Phase I supply from Asian suppliers. Now, to reduce risk, sponsors have had to move to raw materials and early development suppliers in the U.S. and other Western nations—at higher cost.  As well, the regulatory burden has continued to increase. That’s not a bad thing – we need drugs to be safe for humans and animals to take. It’s just more expensive to comply.  

Another factor that drives up early development costs is the ever-growing complexity of the molecules we are being asked to develop. They require many more chemical steps, each of which takes time. There’s sourcing and testing of raw materials. There’s chemistry development time, followed by analytics and documentation for every step. There’s stability testing, and so on and so on.  The only current way to make the process most efficient is to have experienced, knowledgeable staff who stay with the company for many years, as ours do, and to have the latest equipment so they can do their job most efficiently.

The high cost of early-stage drug development is problematic for an industry being pressured to cut costs. It makes it harder to advance new ideas and more difficult to capitalize the cost of an early-stage drug program.

What I question

Scott Gottlieb is a smart guy and he’s doing a lot of the right things. However, I question his belief that ideally, it would be easier to get products into development, with more of the costs pushed further out, to after some of the initial pre-clinical work is already done and there’s a better understanding of whether a new product has clinical promise.

I don’t see how we can push early drug development costs further out.  The APIs still have to be developed in an exacting, time-consuming process.  There is a big push in computational efforts to try to model to improve the odds. That’s great and hopefully will help get us to 2 in 3 successful APIs instead of 1 in 6.  But we’re not there yet.

And, unfortunately, there are other factors to consider.

After all the early drug development has been done and the API meets all its specifications, there is more often than not a high attrition rate from Phase I to Phase II clinical trials. Why? Because of the smaller population in a Phase I trial, results are often different, less promising in the larger Phase II trial. Often a smaller population responds, which is not efficacious enough to justify development of the drug. There’s no real way to solve that problem if you need to test the drug on people with the disease. There are several companies chasing treatments for Cystic Fibrosis, for example. But they’re having trouble recruiting for trials because there aren’t that many patients to begin with, and most are already enrolled in a clinical trial, precluding them from participating in another. 

Like Commissioner Gottlieb, we hope innovative technology, streamlined clinical trials and other factors make early drug development more efficient and less costly.  We can continue to provide patients with better treatments as we learn more about their diseases and conditions. It will help everyone.

We spend considerable time looking at ways to cut costs – the right costs – and to streamline processes. Our project managers and scientists discuss best practices that can benefit all our sponsors. Here are some other blog posts that provide actionable suggestions: “How to Keep Costs Down During Initial Stages of Contract Manufacturing Organization (CMO) Engagements,” “How to Keep CMO Costs Down During the Process Optimization Stage of Drug Development,” “Reducing Cycle Time and Cutting Raw Material Costs,” and “What’s Behind Rising Drug Prices and What Can Be Done To Control Them?