What is the Actual Cost of Clinical Trials?                                            [Thursday, July 9, 2020]

The most expensive component of the development program for any new medical product is the clinical trials, particularly the pivotal clinical trials, that could recruit hundreds if not thousands of patients per trial and take 1-2 years to complete. Most industry estimates claim that the pivotal clinical trials account for more than 70% of the total cost of development which could add up to 200-600 million dollars. However, a recent independent analysis indicates that it costs about $48 million to conduct all pivotal trials for the approval of a new drug, with each pivotal trial costing about $19 million. The debate on the cost of developing a new drug is closely related to that about the cost of drugs to patients, so any doubts on the actual claimed cost of development strikes at the heart of the often used justification for the cost of drugs by the industry. The authors for the study published in the British Medical Journal, used publicly available information on the design, scope, patient population, and variable to risk of the trial from clinicaltrials.gov, FDA’s published review of the market approval applications, and peer reviewed publications. The information collected on 52 determinants of the cost of a clinical trial were plugged into a clinical trial cost estimating program which, in turn, was based on actual data from the cost of 2000 clinical trials with about 200,000 trials sites in 60 countries. The program yielded low, medium and high estimates based on the industry benchmark data for the cost associated with running a clinical trial. None of the number reported in the article seem unrealistic. And this is not the first time questions have been raised by the often touted industry estimate of the cost of developing a new drug. Even if we account for the high cost of production, the high level of risk taken by the investors, and other factors contributing to the approval of a new drug, it is hard to defend that it costs $1-2 billion cost estimate popularly used. But, this argument missed the key component of the cost of a drug, namely, market. The cost of product is defined by what the market is willing to or able to bear. A simple clue could be that the same drug could cost a fraction of what it does in the US or EU, in other countries, because markets there would not be able to bear the US cost of that drug. Also, competition could reduce drug prices. So, the best way to reduce the cost of drugs to patients is to encourage more drug approvals for the same indication, rather than trying to argue with a manufacturer to charge less for their drug. The whole drug pricing debate should be about how more products can be created so there are no monopolies and patients can pick what cost less and works the same way.