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Precision Oncology Drugs Cost $1B Less to Develop Than Traditional Therapies, Study Suggests

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NEW YORK – A comparison of the R&D costs for more than 70 oncology drugs, those that rely on companion diagnostics to personalize treatment and those that don't, found that the former cost about $1.1 billion less to bring to market.

The study, published in the Journal of Pharmaceutical Policy and Practice earlier this month, looked at R&D costs and sales data for 42 CDx-directed precision medicines and 29 treatments that didn't use such tests approved between 1997 and 2020. The researchers from the health economics consultancy Salutem Insights, health technology firm Diaceutics, healthcare data analytics firm Inovalon, and several academic research institutions analyzed filings that 56 companies made to the US Securities and Exchange Commission and determined if precision medicine approaches increased R&D costs.

"This study indicates that the deployment of a companion diagnostic at the earliest stage substantially lowers the cost associated with oncology medicine development, potentially making it available to more patients, while staying within the cost constraints of cancer health systems," researchers led by Raymond Henderson, a senior health technology assessment manager at Salutem Insights, wrote in the paper.

For the study, precision oncology drugs were defined as those developed with the intention of using a CDx to select patients for treatment, and researchers compared the costs of developing these drugs with therapies that don't rely on tests to identify patients who should get them. The study excluded CAR T-cell therapies, radiopharmaceuticals, and hormonal blockers to ensure that the precision and non-precision drugs included in the study had similar R&D pathways, Henderson noted in an interview.

The analysis suggested that CDx-informed precision drugs cost 25 percent, or about $1.1 billion, less to develop than treatments for all-comer populations. Although this was not a statistically significant finding, the trend seen in the data indicates to Henderson that "precision medicines cost less, even though they have the cost of the test built into the clinical trials where every patient is going to be tested."

The researchers calculated the average R&D costs for a precision oncology drug at $3.53 billion versus $4.62 billion for non-precision oncology medicines. To calculate R&D costs, researchers considered spending data from SEC filings, including what companies spent on preclinical and clinical studies, and they used a formula to estimate each drug's probability of success and cost of capital, minus any tax credits or rebates.

Twenty-one drugs in the analysis had more publicly available spending data, which researchers considered high-quality information because they could extract more or less exact R&D spending data for each drug development program from SEC filings; 59 drugs had less publicly available, medium-quality data, according to researchers, because they had to impute R&D spending for individual treatment programs from total R&D budgets reported in SEC filings. Higher quality data would naturally lead to more accurate R&D spending estimates.

"Our analysis is only statistically significant when restricted to small US companies with rigorous and transparent accounting standards, when conclusions relating to the decreased R&D cost of a precision oncology medicine are sound," the authors wrote. "Generally, we have demonstrated on average it costs almost $1.1 billion more to bring a non-precision oncology medicine through the cancer drug development process, compared to a precision oncology medicine, but although trending, this difference is not statistically significant."

Among the 21 drugs with high-quality data, for which the companies published R&D costs or any missing data could be estimated through other analyses, precision drugs cost $2.48 billion and non-precision medicines cost $6.12 billion, resulting in an even larger gap of $3.64 billion. These estimated R&D costs from the smaller group with high-quality data were statistically significant.

Researchers further found that precision drugs had a higher probability of success, which they concluded contributed to the lower R&D costs. Drug trials that used a CDx to assess which patients were most likely to respond to the treatment were 2.5-times more likely to succeed and reach the market than those that did not use a companion diagnostic. In Phase I trials, for instance, CDx-guided precision drugs had a 33.5 percent probability of success compared to 26.3 percent for non-precision treatments.

The researchers also estimated the return on investment (ROI) for drugmakers for both of these types of therapies. Because precision oncology drugs have been on the market for less time than non-precision drugs, a straight ROI comparison based on sales data was skewed. When researchers adjusted their analysis and focused only on drugs launched between 1997 and 2015, excluding more recently approved precision medicines, CDx-guided treatments were 27 percent more profitable than non-precision oncology drugs.

"When we looked at the [sales] data per year, precision drugs were outperforming traditional oncology drugs, so we gave precision a head start in the sense that we limited it to allow time for drug sales to accrue," Henderson said in an interview. "Lo and behold, precision medicines came out on top for better return on investment. So, they're less expensive to make and more profitable."

He noted that the ROI for precision drugs was boosted by several blockbuster treatments, such as Genentech's Herceptin (trastuzumab) for HER2-positive breast cancer and Tarceva (erlotinib) for EGFR-mutant non-small cell lung cancer, which saw 3,421 percent and 2,794 percent ROI, respectively.

Looking at other aspects of precision medicine development, researchers found these drugs took marginally longer to develop and the trials enrolled about a quarter more patients than studies for traditional drugs, though these findings weren't statistically significant. Precision oncology medicines also captured 51.4 percent market share in annual sales compared to non-precision oncology medicines.

While these precision therapies may be less expensive for drugmakers to bring to market, many patients still struggle to access these treatments due to high list prices and difficulties getting insurers to cover the drugs or companion tests.

Henderson and his team suggested in their paper that the savings companies incur in developing precision cancer medicines could be reinvested into efforts to increase patients' access to companion molecular tests and into establishing pricing schemes that facilitate equitable access to the drugs.

The researchers also called for greater transparency from companies on how they report R&D costs for drugs in their pipeline. Henderson noted that the smaller pharmas tended to report R&D costs in greater detail, while bigger firms only report sales figures.

Henderson and his team are continuing to explore how precision oncology medicines are impacting drug development and market dynamics. They are currently analyzing how quickly precision and non-precision cancer drugs in Europe achieve reimbursement. Preliminary findings from that study suggest that precision oncology medicines have a shorter time from regulatory approval to reimbursement in Europe than one-size-fits-all cancer drugs do, Henderson said.

"We're asking for more transparent accounting, so we, as outsiders, can track the data more easily and see where they're having problems with R&D," he said. "By comparing costs with other companies or other countries, we could come up with some solutions on how they can streamline or improve the R&D process."