The cost of delays in development and sales: It’s probably not what you think

Announcer: The BioWorld Insider podcast.

Lynn Yoffee: This is the BioWorld Insider Podcast. I’m Lynn Yoffee, BioWorld’s publisher. Drug pricing has always been fraught with controversy. It’s a perpetual balancing act of making therapeutics affordable for patients while also charging enough to fund biopharma’s continuing innovation cycle. Two specific costs of drug development that are often discussed and debated have just been updated with some pretty startling results.

One is focused on the cost of a single day of delay in conducting a clinical trial. The other is the cost of missing a day to generate prescription drug sales. Both were outdated costs and they were based on anecdotal evidence, according to the Tufts Center for the Study of Drug Development. The center has new research and revealed some very different and updated costs. Our guest today is Ken Getz. He’s the executive director and a professor at the Tufts University School of Medicine’s Center for the Study of Drug Development.

Welcome, Ken.

Ken Getz: It is a pleasure to be here, Lynn. Thank you.

Lynn: Ken is here today talking with Lee Landenberger. He’s a BioWorld staff writer and the BioWorld Insider Podcast host. He’ll be talking about what the center found and how it affects drug developers and patients. Lee?

Lee Landenberger: Thanks, Lynn. Ken, I really appreciate you joining us here today. I read the new data, the study that you did at Tufts. I found it fascinating, so I’m glad you could be here today to talk about these numbers.

Ken: It is a pleasure, Lee, and really looking forward to diving into the new study results.

Lee: Great. Let’s do it right now. First question: How long has it been since the value of these kinds of delays had been studied? Then let us know what the original numbers were based on.

Ken: The last time this was actually studied was 30-plus years ago and it really speaks to a broader challenge that we face. Often we see data that is gathered and essentially kicks around for a very long time, and we don’t often have a chance to really challenge some of these legacy figures, and that was part of the impetus for the study. The data on the cost of a day of delay in unrealized prescription drug sales comes from the Office of Technology Assessment and there was a parallel study done by the Boston Consulting Group back in the early ’90s.

The other data point, the direct cost of a day of delay in a clinical trial, is really associated with a group called Dataedge, which then became Fast Track Systems, which was then acquired by Medidata Solutions. That too was conducted in the early ‘90s, around 1992 and 1993.

Lee: Why the big delay in updating these numbers? Why keep them as they were? Did people know that they were wrong?

Ken: They did not, and that really– it’s a very interesting phenomenon. I think often a data point that we’ve been looking for, that we want to use, becomes part of our common mainstream thinking, and we often don’t realize that these are data points that constantly need to be challenged and reconsidered, especially given all of the trends and changes that are happening in the landscape. Every once in a while, the Tufts Center takes a look at some of these statistics and really asks the question, Is this even relevant today? This is clearly one of those statistics or one set of data points that really are so antiquated.

Lee: Let’s update them. How did you source this new data?

Ken: We used an approach that was similar to the one used by the Office of Technology Assessment and BCG, as well as Dataedge. For the delay in realizing prescription drug sales, we essentially looked at all drugs that had been approved and marketed since, I want to say, 2000, January of 2000. We gathered sales data on all of these drugs for that essentially 24-, 25-year time horizon, and we inflation-adjusted all of the sales for those drugs to 2023 dollars.

It’s important to note that we looked at every year for which sales data was available. If a drug that was introduced after January 2000 was discontinued, it had faced a generic competition and then eventually was no longer in the marketplace. If no sales data appeared in some of those later years, then we assume that that drug was no longer generating sales.

Lee: Got it. What was the accepted cost of a day’s delay in development and what’s the new number?

Ken: The accepted cost, which really is associated with a totally different era, what we often refer to as the blockbuster era, where you had drugs generating massive, multibillion dollar sales. Those 1990 figures were around $4 to $5 million in prescription drug sales. The new figure is about 20% of that level, about $800,000 on average for a given drug in daily prescription sales.

An interesting thought, Lee, just to consider is that when we asked people to predict what they think had happened to the average daily sales number, most people assumed it had continued to rise. It was really quite a shock that it was a fifth of the level that we had seen often frequently referenced in the 1990 timeframe.

Lee: Yes, it’s counterintuitive. I can understand confusion about it. I was going to ask you why the number, in your new data, has dropped so much.

Ken: Yes. I think that relates to a number of factors. It relates to, in some classes of drugs, it may relate to the competitive landscape or the competitive intensity and the crowded class so that each drug, to some extent, tied to order of entry, is generating lower relative sales. We also see so many drugs that are targeting smaller markets, drugs that are based on genetic information, personalized therapies, and we see a lot of orphan drugs or those targeting rare and ultra-rare diseases where the overall market is much smaller. It’s even quite conceivable that the overall duration of time that the drugs have been generating sales is shorter.

Lee: What about the accepted cost of a day’s delay in clinical development? Can you tell me what the traditional accepted number was and what the new number is that you found?

Ken: Yes. I didn’t mention earlier that statistic is based on a clinical trial budget that is provided by the drug development sponsor, and we look at the total duration of the clinical trial to derive a daily figure. It only reflects the direct cost, so the cost to engage the investigative site and all of the study grant-related expenses, direct costs that are associated with a CRO if they’re helping to manage the study. The original figure there was around $37,000 to $40,000. This was in 1995 dollars. The new inflation-adjusted figure is nearly identical, about $40,000. That also is counterintuitive. You’d assume that just with the regular rate of inflation, the direct costs would continue to rise over that 30-year time period.
We believe to some extent it reflects some cost efficiencies, maybe certain technologies or certain procedures that are conducted are less expensive today than they were 30 years ago. We think it may also reflect operating models where investigative sites are being challenged increasingly to do more with fewer relative dollars.

Lee: When you collected all this data and you came up with the new numbers, were there eyebrows raised? Were you surprised by anything you saw?

Ken: Many, and I think this goes right back to the question you asked initially. These are generally widely accepted and widely referenced data points. In fact, it’s so common for salespeople when they’re talking about time savings to translate it into financial value. When we came out with our new figures, as we see fairly regularly, it generated a tremendous response, including comments from the editor of the peer review journal, who noted how much he enjoys seeing hard data that really starts to stir things up and reflect very, very different reality than the one we’ve been operating under. We’ve received many calls from pharma companies, from the investment community, looking to understand the research and that to apply these new figures.

Lee: Yes, I was curious about how developers and investors reacted. Can you– we don’t have to name names or companies or anything, but I’m just curious, people must have been astonished.

Ken: Astonished is a good way to put it. Most companies, most sponsors and CROs in particular, have financially oriented portfolio planning professionals. They do a lot of financial forecasting. They do return on investment assessments and many will even apply these figures just to evaluate whether to adopt a new innovative approach, for example, or to pilot test a new technology solution.

Also, as I mentioned, vendors, especially business development and salespeople that are working for technology services or technology product providers, they all love to reference this statistic to show that if we save a company three days of time, that’s worth $12 million in now realized prescription drug sales. Salespeople have had to really adjust how they present the value proposition of an innovation or of a new service now at this time.

Lee: This whole thing is so counterintuitive. Here’s another counterintuitive question. How does a less expensive clinical trial cost connect with the increasing cost to develop drugs?

Ken: It’s a really complex and dynamic question. One way to think about this is essentially part of the way the Tufts Center orients so much of our research. We’re really trying to elevate the understanding that so much of what we do in drug development is not viable, not financially viable, and that the drug development paradigm is under a tremendous amount of strain.

There’s a perverse relationship between risk and return in our industry, and this new study really shakes out even more compelling insight. The way to really phrase that or think about it, Lee, is as risk has increased in drug development. Today, less than 10% of all drugs and biologics that enter clinical testing are approved. You’d expect with increasing risk that you would have an increasing return on that high-risk asset and yet the opposite is now being seen.

The return is declining at the same time that risk is rising. It really, in many respects, forces us to think in even more thoughtful ways about how we change the drug development paradigm. Does it mean that we look for ways to reduce our direct costs, to curtail and focus our investment? What are some of the things that we can do to accelerate our timelines and drive higher levels of efficiency? These are all areas that we look at in our research.

Lee: Yes, that was my next question. Maybe you could expand on that a little bit. When developers and investors got back to you, you heard from them about your new data. Did they talk about how they may change developing candidates?

Ken: I think it’s early stage. I think the shock is still settling in but we know a number of organizations that have been really compelled to look at solutions like the use of generative AI to support the rapid growth in data volume and the challenges of data management, for example. We’ve had conversations with companies that have been looking at risk-based quality management principles to prioritize what specific data that they’ll look at and maybe even lower their monitoring costs and the high resource-intensive source data review and verification process.

We’ve had companies that have mentioned that they want to really evaluate how they staff some of their clinical trials today, the types of sites that they use, as well as the manpower, including outsourced manpower that they engage to support every trial.

Lee: Ken, these numbers are fascinating. Thank you so much for your time and your insight. I really appreciate it, and I’m looking forward to seeing how this all manifests itself in the workplace.

Ken: I am as well, Lee. Thanks.

Lee: Lynn, back to you.

Lynn: That’s our show for today. As always, BioWorld will continue to keep you informed of all the most important scientific, clinical, regulatory, and business updates. We’re a daily news service covering the development of the most innovative human therapeutics designed to improve the human condition. If you need to track the development of drugs, turn to Bioworld.com. You can follow us on LinkedIn or X, and if you want to share news with us, drop us an email to Newsdesk@bioworld.com. Also, if you’re enjoying this podcast, don’t forget to subscribe via your favorite platform. Thanks for joining us today.

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