Question How does income from the sales of cancer drugs compare with the costs of research and development?
Findings In this observational study of 99 cancer drugs approved by the FDA from 1989 to 2017, the median income return by the end of 2017 was found to be $14.50 (range, $3.30-$55.10) for every $1 research and development spending. Many drugs, particularly biologics, continued to generate high-sales incomes for the originator companies after expiry of patents and exclusive marketing rights.
Meaning Cancer drugs, through high prices, have generated incomes for the companies far in excess of research and development costs; lowering prices of cancer drugs and facilitating greater competition are essential for improving patient access, health system’s financial sustainability, and future innovation.
Importance High costs and risks of research and development (R&D) have been used to justify the high prices of cancer drugs. However, what the return on R&D investment is, and by extension what a justifiable price might be, is unclear.
Objective To compare incomes from the sales of cancer drugs with the estimated R&D costs.
Design, Setting, and Participants This observational study used global pharmaceutical industry sales data to quantify the cumulative incomes generated from the sales of cancer drugs for companies that have held patents or marketing rights (originator companies). All cancer drugs approved by the US Food and Drug Administration from 1989 to 2017 were identified from the United States Food and Drug Administration’s website and literature. Itemized product sales data were extracted from the originator companies’ consolidated financial reports. For drugs with data missing in specific years, additional data was sought from other public sources, or where necessary, estimated values from known reported values. Drugs were excluded if there were missing data for half or more of the years since approval. Data analysis was conducted from May 2018 to October 2018.
Main Outcomes and Measures Sales data were expressed in 2017 US dollars with adjustments for inflation. Cumulative incomes from the sales of these drugs were compared against the R&D costs estimated in the literature, which had been adjusted for the costs of capital and trial failure (risk adjusted).
Results Of the 156 US Food and Drug Administration–approved cancer drugs identified, 99 drugs (63.5%) had data for more than half of the years since approval and were included in the analysis. There was a median of 10 years (range, 1-28 years) of sales data with 1040 data points, 79 (7.6%) of which were estimated. Compared with the total risk-adjusted R&D cost of $794 million (range, $2827-$219 million) per medicine estimated in the literature, by the end of 2017, the median cumulative sales income was $14.50 (range, $3.30-$55.10) per dollar invested for R&D. Median time to fully recover the maximum possible risk-adjusted cost of R&D ($2827 million) was 5 years (range, 2-10 years; n = 56). Cancer drugs continued to generate billion-dollar returns for the originator companies after the end-of-market exclusivity, particularly for biologics.
Conclusions and Relevance Cancer drugs, through high prices, have generated returns for the originator companies far in excess of possible R&D costs. Lowering prices of cancer drugs and facilitating greater competition are essential for improving patient access, health system’s financial sustainability, and future innovation.