(348a) Improving Pharmaceutical Product Development and Manufacturing: Impact on Cost of Goods Sold of Pharmaceuticals and Cost of New Drug Development

The cost of developing a new drug has been steadily increasing in recent years. This has been identified as one of the major reasons for the high cost of prescription drugs in this country. In spite of such high cost for developing a new drug, manufacturing processes of marketed pharmaceutical products are still relatively inefficient and unreliable. As a result, the cost incurred by the industry and the regulatory agencies to ensure that safe and effective products are made available to the consumers is also very high. At the same time, with new and advanced therapies, manufacturing processes for the new pharmaceutical products are becoming increasingly more complex. These challenges require new research in fundamentals of manufacturing science in order to make an impact in reducing time and cost of product development and cost of goods (COGS) of pharmaceutical products. While some generic numbers are routinely stated for the cost of a new drug and the Cost of Good Sold (COGS) for pharmaceutical products sold in this country,, there is a need to conduct a study to determine and estimate the current ranges and the various factors that affect these numbers in order to identify the potential for cost savings and improvement. In this study we have made an attempt towards that goal.

Our investigation shows that the estimated monetary benefit due to fundamental research in pharmaceutical manufacturing, in terms of possible savings in COGS, lie in the range of $10-50 billion per year. Furthermore, additional potential revenue due to reaching peak sales faster (when supply is limiting) is in the range of $12-18 billion per year for the whole industry. The corresponding numbers for each individual drug is estimated to be about $19 - 577 Million in its lifetime. The paper suggests how developing the science to develop more reliable and robust manufacturing processes could result in savings in COGS.

This study also compares the various estimates of the cost of drug development that are found in literature and attempts to estimate the true cost of developing a new drug in 2005 as an extension of the work done by Dimasi et al. An attempt is also made to identify the cost attributable to product development. The key findings are that depending on the origin of the new molecule and its therapeutic category, the cost of developing an NME (New Molecular Entity) in 2005 dollars (using an 11% cost of capital and a 14% clinical success rate) could be as high as $2.0 to $2.5 billion. Cost of product development is predicted to be 30% to 35% of this cost. Assuming that fundamental research in product development could save a modest 10% of the total cost of developing an NME, the cost of new drug development could be reduced by at least $250 Million per new drug entering the market. If on an average, 20 to 25 NME's are launched every year, the total cost saving for the industry could amount to as much as $5 billion per year.