Intended for healthcare professionals

Rapid response to:


High cost of new drugs

BMJ 2016; 354 doi: (Published 27 July 2016) Cite this as: BMJ 2016;354:i4136

Rapid Response:

Reply to Mazzucato and Torreele

The rebuttal of Mazzucato and Torreele (1) to my response (2) on Mazzucato’s editorial on high prices of new medicines (3) clearly shows how the discussion on the respective roles of the public and private sector in drug innovation is hampered by the use of different definitions and assumptions, and selective use of references.
The most relevant factor in the discussion whether or not the public is paying twice for its drugs, seems to me to identify the accountable party for the discovery and development of the new chemical entity, defined as a drug that contains no active moiety that has been approved by regulatory authorities. That is one of the issues that Stevens et al. address (4). Overall, the public sector was responsible for that in 9.3% of the new drug approvals (see bottom row in Table 2 of that paper). Numbers found by other authors were 6.7% (5), 24.1% (6) and 7.6% (7). This is by far not what Mazzucato (quoting Marcia Angell) claims in “The Entrepreneurial State”: “It has been state funded labs and research that are responsible for two-thirds of the new molecular entities that have been discovered in the last ten years” (8). Obviously, the industry makes use of knowledge gained in publicly funded basic research. As Mazzucato and Torreele rightly say, without Julius Axelrod’s research on neurotransmitters the pharmaceutical industry’s discovery of the selective serotonin-reuptake inhibitors (SSRIs) could not have taken place. However, costs and risks to bring drugs to the market are entirely for the private sector. This includes the very frequent failure to replicate findings that originated from publicly financed basic research (up to 90%) (9). Because of replication issues, it has been estimated that in the United States alone annually approximately $28 billion of mainly public money is being wasted in this preclinical phase (10).
The research and development (R&D) can not be done for $30-40 million as claimed by the Drugs for Neglected Diseases Initiative (DNDi). Between 2003 and 2015 this organisation delivered six treatments, all of them fixed combinations or pediatric dosage forms of existing drugs (11), so not new chemical entities, as Mazzucato and Torreele claim. Useful, but hardly representative for the drug discovery and development process. One cardiovascular outcome clinical trial will already cost a multiple of these figures. Critics also always conveniently leave out the remainder of the quote from GSK’s CEO Sir Andrew Witty on the “one billion dollar myth”, where he added it is “an average figure that includes money spent on drugs that ultimately fail”(12). With an attrition rate of around 90% after first human dosing (13), R&D costs for failures should indeed be included in cost estimations. By dividing the input (R&D expenditures) by the output (number of approved drugs), it is clear that costs for the large companies are in the magnitude of billions rather than millions. Acquisition costs to take over other companies are not relevant in this statistic, because these are accounted for differently in corporate reports.
From the 45 new drugs that were approved by the Food and Drug Administration (FDA) in 2015, the agency itself defined 36% having a new and unique mechanism of action (first-in-class). However, taking a more realistic approach, it has been argued that in fact this was applicable for nearly half of these medicines (14). The suggestion by Mazzucato and Torreele that 70% of all approved drugs do not add value is absurd and highly subjective. The availability of multiple drugs for the same indication but with different mechanisms of action will increase choice for doctors as not every patient is the same. It also helps even within a monopoly to negotiate lower prices of patented drugs, as shown in the United States for the hepatitis C medicines (15).
In summary, I completely concur with Mazzucato and Torreele that basic research by the public sector can give scientific insights that serve as starting points in the search for new drugs by companies. However, whether that in itself means that the public is paying twice for its medicines, is debatable. The public investments are a very small fraction of the actual costs to discover these drugs, to make them selective, potent, stable, easy to synthesize and pharmaceutically feasible to administer, to ensure these molecules are adequately absorbed, distributed and eliminated from the body, and to prove their safety and efficacy in clinical trials. Let us not downplay the magnitude of these investments by the industry or ridicule the value of their innovation. At the end, without the private sector there would be no new drugs at all for patients who need them.

1. Mazzucato M, Torreele E. Authors’ reply to Henk Jan Out. BMJ 2016;354:i4136
2. Out HJ. Re: High costs of new drugs - Recognize the pivotal role of the private sector. BMJ 2016;354:i4136
3. Mazzucato M. High Cost of New Drugs, BMJ 2016; 354: i4136
4. Stevens AJ et al. The Role of Public-Sector Research in the Discovery of Drugs and Vaccines. N Engl J Med 2011; 364: 535-41.
5. DiMasi JA et al. The price of innovation: new estimates of drug development costs. J Health Econ 2003; 22: 151-85.
6. Kneller R. The importance of new companies for drug discovery: origins of a decade of new drugs. Nat Rev Drug Discov 2010; 9: 867-82.
7. Kaitin KI et al. The role of the research-based pharmaceutical industry in medical progress in the United States. J Clin Pharmacol 1993; 33: 412-7.
8. Mazzucato M. The entrepreneurial state, Demos, 2011, page 55.
9. Begley CG et al. Drug development: Raise standards for preclinical cancer research. Nature 2012; 483: 531–3.
10. Freedman LP et al. The Economics of Reproducibility in Preclinical Research. PLOS Biol 2015; 13: e1002165.
11. DNDi Business Plan 2015 – 2023
12. Hirschler B. GlaxoSmithKline boss says new drugs can be cheaper. Reuters Health, 14 March 2013.
13. Hay M et al. Clinical development success rates for investigational drugs. Nature Biotechnology 2014; 32: 40-51.
14. Munos B. 2015 New Drug Approvals Hit 66-Year High! Forbes, 4 January 2016
15. Eichler HG et al. Drug regulation and pricing – Can regulators influence affordability? N Engl J Med 2016; 374; 1807-9.

Competing interests: I worked for more than 20 years as pharmaceutical physician in the pharmaceutical industry.

21 August 2016
Henk Jan Out
Visiting Professor
Faculty of Health Sciences and Wellbeing, University of Sunderland, UK
Sciences Complex, City Campus, Chester Road, Sunderland, SR1 3SD