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Why Our Drugs Cost so Much – Getting to the Root Cause

June 27, 2018
Posted by: Gerald “Pharmacist Jerry” Finken, RPh, MS; Contributor: Martha Morton

Why Our Drugs Cost so Much - Getting to the Root Cause

Lately, it seems like the ongoing conversation about drug pricing has hit a peak and is becoming old news. Many recent articles have challenged readers to ask themselves why they are paying so much for their prescription medications. This posed question -whether direct or indirect- has been utilized as a leeway to a heated discussion, painting the pharmacy industry as one that sets out to snatch money from the pockets of their customers and only recently has brought in the pricing abuse by distributors, PBMs and insurance middlemen. As mentioned in a former blog, much of this blame has been placed on drug manufacturers. Unfortunately, many of these articles do not depict the full picture of why drugs cost so much and none of them talk about what we can do and must do as an industry to reduce drug costs.

I would like to start off by saying that, yes, I agree that drug pricing has many areas that require improvement and I recognize that there are still many patients that cannot pay for their medications. I, personally, have also witnessed many independent retail pharmacies closing their doors due to the cost of drugs. So, let’s investigate exactly why  drugs cost as much as they do and then challenge those reasons by looking at the root cause.

The Costs of Drug Development and Market Introduction

While there are many reasons why a drug may be expensive, the most basic reasons are the associated price of drug development and market introduction. Both take a lot of time, effort, and money.

Drug development is much more complex than those two words. It is the overarching term to describe an entire process, involving various stages. The first stage being discovery and development, where researchers determine a target for the drug to act upon and develop compounds that may potentially hit that target. For example, if we are hoping to form a drug that treats Parkinson’s Disease, our target would more than likely be a brain cell. Upon target identification, up to ten thousand compounds are tested in order to find the lead compound (the compound that has the intended or otherwise desirable effect). Once the lead compound is discovered, the chemical makeup is studied and possibly altered to improve activity. This stage alone can take 3-6 years per drug, not to mention more than  $200 million spent.

The next stage is preclinical studies, where in-vitro (within non-living organism) and in-vivo (within a living organism) testing takes place. Out of around 10,000 compounds, the approximate 250 promising ones may make it to this testing phase. This stage is meant to assess the efficacy and potential harmful effects of the drug prior to human trials. The average cost for preclinical studies is $122 million, and takes around 1.5 years.

Next are the clinical trials, where the drug is finally tested on human volunteers. The aim is to figure out how the drug interacts in the body, through three individual phases (Phases I-III). Phase I involves testing the drug in 20-100 healthy volunteers to determine potential side effects and how the drug moves in the body (pharmacokinetics). Phase II involves 100-300 participants with the condition, to ensure effectiveness of the drug. In other words, phase II is meant to make sure the drug actually does what it is intended to do in the population it is meant to treat. Phase III, the last of clinical trial phases, includes 300-3000 volunteers in hopes to continue proving efficacy and to monitor adverse effects that may only boil to the surface after a more “long-term” treatment (1-4 years). Sometimes even a fourth phase is tagged on to further test the efficacy and safety of the drug.  Before these phases begin the research team must have an established clinical trial design, submit an Investigational New Drug application and achieve FDA approval. Overall, the clinical trial stage of the process can take anywhere from 4-7 years, costing more than $1 billion.

Once the medication has made it through the clinical trials, now the pharmaceutical companies must submit a New Drug Application for approval to the FDA. The FDA then reviews the application, taking 6-10 months. Upon approval, the FDA and the company iron out all of the additional prescribing details. Finally, the FDA has reviewed and registered the drug about a year and a half and $11 million later.

Now, when you thought the process was over, it has only just begun. The drug has finally made it to the market, but it is still being monitored for safety and effectiveness. The cycle never ends unless the drug is discontinued. This is where the cost of market introduction into clinical practice comes in to play. The drug must be advertised, mass produced, packaged, and intertwined with the already present treatment options for a given condition. All of which take the time, effort, a financial backing mentioned before.

We have all seen these numbers before and they are quoted more than Shakespeare these days, especially by technology companies.  So, if we were to start looking at the root cause of drug costs, where would you start in terms of the time period and the cost? Which one would you select below?

  1. 3-6 years and $200 million
  2. 5 years and $122 million
  3. 4-7 years and $1 billion
  4. 5 years and $11 million

For me, first I would admit that we have a real problem with drug development costs.  I would then start looking at the problem by selecting “number 3” above.  I would then use the “5 Whys” as a means to understanding the root cause of our drug development cost problem.  I would also step back and look at the path of how we got to where we are today, and question – are we better off?

We can all agree that over the past 40 years one of the biggest changes to clinical research has been our wholesale adoption of technology.   But, with all its promises over the past 40 years, we still have 9 out of 10 drugs failing and it still takes the same amount of time to develop, so the one area we all know where technology should be impacting drug development should be on costs.  Think about the cost of your first calculator 40 years ago and what you can buy and do now for the same amount of money.  Yet in clinical research this has not happened.  This is where I would start asking my “whys”.

We could start by asking the not-so-obvious whys:

  • Why do we continue to do clinical research the way we do and hope that technology will finally pay off?
  • Why do we think wearables and virtual studies will finally be the technology solution to our drug cost problem?
  • Why do we think virtual communities will cure our woes and make a difference?

However, before we start answering the above whys, we should ask and answer the “big picture why” Simon Sinek so eloquently described in his TED talk.

To me, our answer to Mr. Sinek’s “big picture why” is to improve the overall health outcomes of patients. And if this is the case, then we absolutely MUST redirect our focus to the patient. Having 9 out of 10 drugs fail, taking 10-14 years to get a drug approved and at a cost of $1.4 billion is truly NOT patient focused.  This is why I am calling for disruption and advocating the siteless model, which uses technology as a tool rather than a solution while challenging every aspect of clinical research.

What do you think?


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