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Gottlieb's Dueling Acronyms

  • 10.12.2017
  • Peter Pitts
And there are just as many reasons to say "yes" to HHS.


Reports that FDA Commissioner Scott Gottlieb tops President Donald Trump’s list for replacing ousted HHS Secretary Tom Price are reverberating around the Washington echo chamber. The speculation has made its way into so many articles, blogs, tweets and cellphone conversations overheard on the Red Line Metro cars frequented by lobbyists, lawyers and journalists that it has acquired a patina of credibility, even inevitability.

I don’t claim to know whether the job will be offered to Gottlieb or if he would accept it. I do think the interests of patients, FDA, regulated industry and, most likely, Gottlieb himself would be best served if he remains at FDA. Here are four reasons why:


FDA needs stable leadership to produce the regulatory innovation that can turn today’s scientific advances into tomorrow’s medicines.

While the agency can maintain critical functions on autopilot, only a congressionally confirmed leader can break new ground or take controversial steps. Gottlieb has started to take FDA in new directions, for example by making public health arguments for lowering drug prices by tackling pharma company “gamesmanship,” and for making cigarettes less addictive. He has announced plans to release a plan for advancing biomedical innovation that will go beyond the requirements in the recently enacted 21st Century Cures Act and FDA Reauthorization Act.

These projects reflect Gottlieb’s personal experience and vision. It will take years to get them started and on a firm footing. They would likely wither if he departed.


While there certainly are other individuals with the necessary experience and competence to lead FDA, there is no reason to believe they would be nominated if Gottlieb departed.

When Gottlieb was nominated, serious contenders for the position included individuals who want to discard the standards and principles that have made FDA the gold standard for medical product regulation. These guys are still out there, tanned, rested and ready for their opportunity to dismantle the regulatory state and make the world safe for purveyors of snake oil.


Gottlieb lacks the kind of experience required to successfully manage an organization with a trillion-dollar budget and 80,000 employees.

Someone who has been a state governor or headed a state health department or possibly a large university system would be better qualified to deal with the massive budgets, to manage government departments with diverse missions and to placate members of Congress with competing interests.


The person who steps into Price’s shoes will be pinned between a mercurial president prone to humiliating cabinet secretaries, and feuding Republican factions in Congress that are promoting incompatible and impossible healthcare agendas.

The next HHS secretary will be castigated by Republicans for failing to strangle the Affordable Care Act and vilified by Democrats for failing to shore it up. The secretary also will have to defend the Trump administration’s proposals to slash funding for public health and biomedical research. It is difficult to imagine anyone coming out of the job with their integrity and self-respect intact.

If he departs now, Gottlieb will leave no mark behind at FDA, and there aren’t great prospects for advancing the public good at HHS. In contrast, based on his current trajectory, if he stays on the job, Gottlieb is on track to leave with a strong, positive legacy.


  • 10.11.2017
  • Peter Pitts
From the pages of the Wall Street Journal …

A Flawed Study Depicts Drug Companies as Profiteers
Peter J. Pitts

Even the authors admit their selection criteria are a ‘critical limitation.’ That’s an understatement.

Are drug companies ripping off cancer patients? Of course they are, suggests a much-hyped study published last month in the journal JAMA Internal Medicine. The truth is more complicated.

Drug companies receive a staggering return on investment “not seen in other sectors of the economy,” write Vinay Prasad of Oregon Health and Science University and Sham Mailankody of Memorial Sloan Kettering Cancer Center. They estimate that pharmaceutical firms spend $720 million on average to develop a single cancer drug, while the average cancer therapy generates sales of $6.7 billion.

The editors at JAMA are brilliant physicians, but they could use a refresher on the economics of drug development. Several methodological flaws in the study lead the authors to underestimate drug-development costs. 
Messrs. Prasad and Mailankody examined 10 publicly traded companies that secured their first-ever Food and Drug Administration approval between 2006 and 2015. They pulled data on companies’ research spending and revenues from annual financial reports filed with the Securities and Exchange Commission. These selection criteria are a joke. By looking at 10 companies that produced only one cancer drug each, the authors screened out big multinational corporations that had previously secured FDA approval for one or more drugs. Small biotech firms that hadn’t secured FDA approval for any treatments were also excluded. 
The authors admit that the selection criteria are a “critical limitation.” No kidding: They only looked at 15% of all cancer drugs approved from 2006 to 2015, ignoring the other 85% of cancer therapies introduced that decade. This helped them “prove” their hypothesis.
The analysis also overlooks hundreds of millions of dollars of research spending at companies that never develop an FDA-approved medicine. Nine of every 10 publicly traded drug companies lost money in 2014, according to a 2016 International Trade Administration report. Most therapies don’t make it out of the lab and into clinical trials. Of those that do, only 12% are brought to market.
Those that defy the odds and win FDA approval don’t accurately represent the broader biopharmaceutical industry. Consider the success of these 10 drugs against those that are still going through clinical trials. Even if all of these companies’ other experimental drugs in the development pipeline failed, the success of this study’s 10 drugs would have resulted in an overall clinical approval success rate of 23%, twice the industry average.
Worse, five of the companies in question had purchased their drugs from smaller biotech firms. The authors didn’t count any of the research-and-development spending of these “nurturer” firms, only by the acquiring firm.
The other five drugs were developed entirely in-house—and the authors lowballed cost estimates for developing these drugs. Messrs. Prasad and Mailankody counted only two years of development costs before the first mention of the drugs in the medical literature. They figured this would accurately reflect preclinical costs, such as lab tests. 
Their assumption is wrong. In reality, the initial, preclinical research period often lasts four years or more. And for four of the 10 drugs examined, companies started lab research at least seven years before the first mention of the drug in any published medical studies. 
Drug development is much more expensive than the JAMA study suggests. More reliable is a November 2014 study from the Tufts Center for the Study of Drug Development. This more thorough examination estimates total research costs are about $2.6 billion for new cancer drugs. Politicians who advocate price controls undoubtedly will cite the JAMA study anyway. Never mind that government-imposed price caps would hamstring researchers and prevent the development of new treatments and cures.
In the past 17 years, biopharmaceutical companies have invented more than 550 FDA-approved medications. More than 800 experimental cancer drugs are currently under development at companies of all sizes, from tiny biotechs to giant multinationals. By misinforming readers, the JAMA study undermined the great work that drug companies are doing today.
Mr. Pitts, a former FDA associate commissioner (2002-04), is president of the Center for Medicine in the Public Interest
Here’s the CNN headline, “In an attempt to reduce opioid use amid a nationwide abuse epidemic, insurance giant Cigna will no longer cover most OxyContin prescriptions in its group plans beginning January 1.”

Cigna has signed a value-based contract with Collegium Pharmaceutical for the drug Xtampza ER, an oxycodone equivalent with abuse-deterrent properties. According to Cigna’s Chief Pharmacy Officer Jon Maesner "Our focus is on helping customers get the most value from their medications -- this means obtaining effective pain relief while also guarding against opioid misuse.”

That’s fine, but there’s one fact that’s strangely absent – both drugs, Oxycontin and Xtampza ER are equally “abuse-deterrent.” Here’s another important fact – OxyContin was reformulated and in 2013 and became the first opioid with FDA-approved labeling describing abuse-deterrent characteristics. Once the poster-child for abuse, Oxycontin is now at or near the bottom of the “junkie-preferred” chart.

It’s important to understand that both products are formulated with properties designed to deter intranasal (snorting) and intravenous (injection) abuse, but that neither is abuse proof -- and one isn't "better" than the other.

What Cigna isn’t saying is that it’s customers will no longer have access to a range of FDA-approved products with abuse deterrent properties -- limiting a physician’s options to help patients and address the opioid crisis via more personalized, appropriate therapeutic choices.

So, why the switch from Oxycontin to Xtampza ER? Could it be that Cigna negotiated a better deal with Collegium than it had with Purdue Pharma (the manufacturer of Oxycontin)? Unfortunately, this decision appears to be more about pharmaceutical rebates than “guarding against opioid misuse.”

Alas, Cigna’s hyperbole has been met with silence when it comes to pricing transparency.
Per this article from the Washington Post, it's important to note that "not doing additional clinical trials," as I was quoted as saying, does not mean ignoring a more regular and robust use of electronically collected and validated real world data to ascertain the performance of off-label use. The FDA is required by the 21st Century Cures act to develop standard protocols for the use of real world data -- and nowhere is this more crucial than in determining the safe and effective use of medicines via off-label prescribing.

Pressure mounts to lift FDA restrictions on off-label drugs
By Michael Ollove

When the Food and Drug Administration gives its okay for a new drug to be sold, it specifies the diseases or conditions for which the medicine has been approved. That does not mean doctors can’t prescribe that drug for other ailments. They do. All the time. And it’s perfectly legal.

But for decades drugmakers have been barred from promoting their drugs for uses that hadn’t gone through clinical trials. Worried about safety issues, the FDA has prosecuted numerous drugmakers for illegal promotion of off-label uses and extracted billions of dollars in fines and settlements.

Those restrictions could be giving way, perhaps in part because of the appointment of Scott Gottlieb as the new FDA commissioner in May. Before his nomination, Gottlieb, a physician and a resident fellow at the conservative American Enterprise Institute, advocated loosening the restrictions on off-label communications.

That’s exactly what Arizona did earlier this year when it became the first state to allow drugmakers to communicate directly with doctors and insurers about alternative uses of approved prescription drugs. Advocates for the loosening of the restrictions say they expect similar measures to be introduced in other state legislatures in the coming year.

These developments come on the heels of two legal cases in which federal district courts ruled that the First Amendment does not allow the FDA to prevent manufacturers from providing truthful information about their products to doctors.

Supporters say it makes sense to get rid of the restrictions on off-label drugs at a time when plenty of information and misinformation about prescription drugs is readily available to anyone with an Internet connection. And, they insist, who better to provide accurate facts about their products than their makers?

“We believe it’s a disservice to patients and physicians to prevent them from getting information from manufacturers who know their medicines best,” said Naomi Lopez Bauman, director of health-care policy at the Goldwater Institute, the libertarian think tank that devised the Arizona legislation and is promoting it in other states.

Bauman said she expects bills to be filed elsewhere in the coming year, but she refused to disclose which states Goldwater is targeting.

Many critics, however, remain firmly opposed to such efforts. “There have literally been dozens and dozens of examples of ­off-label uses of drugs encouraged by pharmaceutical companies in reckless ways that have led to substantial patient morbidity and mortality,” said Aaron Kesselheim, director of the Program on Regulation, Therapeutics and Law at Harvard Medical School.

Wide off-label use

Before a new drug can be sold in the United States, the FDA must affirm that it is safe and effective for specified uses, which are then described in the medicine’s labeling. But once a drug is approved, doctors are free to prescribe it for uses not specified in the labeling. That is because the FDA regulates products but not the practice of medicine.

Prescribing for off-label uses has become common. A 2013 study found that 30 percent of the prescriptions for oncology drugs were used for off-label purposes. Another found that 70 percent of a popular category of pediatric anti­psychotic drugs were prescribed for purposes not cited in the FDA’s approval of those medicines, including, for example, for the treatment of attention-deficit/hyperactivity disorder.

Sometimes the off-label use of prescription drugs comes to be considered the best treatment for certain conditions. “For some cancer drugs, the best therapeutic use is for off-label purposes,” said Peter Pitts, president and co-founder of the Center for Medicine in the Public Interest, a nonprofit research and advocacy organization that is funded by the pharmaceutical industry.

One example is tricyclic antidepressants, a class of drugs that do not have FDA approval as treatment for nerve-related pain yet are considered by doctors to be the first choice of drugs for that purpose.

Nevertheless, a recent study published in the journal JAMA found a higher incidence of adverse drug effects from off-label use than from on-label use.
Pitts does not think the FDA should prohibit drugmakers from dispensing information that might be relevant to those ­off-label uses. “In fact, it’s almost irresponsible not to let them dispense that information as long as it’s truthful, accurate and not misleading,” he said.

Pitts and others say it is unreasonable to expect drug manufacturers to embark on additional clinical trials to demonstrate the safety and efficacy of already approved drugs for new purposes. That effort, like the original process, could cost drugmakers hundreds of millions of dollars in new testing and take years.

“If your drug is approved for X, why would you ever commit millions in additional testing to get approval for Y, when it’s already legal to use it for Y?” Pitts said.

Undermining the process?

The answer, according to opponents of loosening the restrictions, is public safety. If the FDA didn’t approve a drug for off-label uses, they say, that means the drugmaker hasn’t produced evidence to demonstrate the drug is safe and effective for those other uses.

“If you take it as your premise that an objective approval by someone with no financial interest is necessary to protect patients, then marketing a drug for unapproved uses is the same as marketing an unapproved drug,” said Allison Zieve, director of the litigation group at Public Citizen, a consumer watchdog group that opposes loosening the communication restrictions. To allow drugmakers to do so, she said, would undermine the whole system of FDA drug approval.

Zieve and other opponents point out that the limitations do not prevent the manufacturers from sharing peer-reviewed, scientific articles about off-label uses of their drugs with doctors and others. They just can’t promote off-label use in their marketing.

The Goldwater Institute — named for Barry Goldwater, who was a U.S. senator from Arizona — wrote the model law upon which the Arizona legislation was based. “It just seemed to me that this was a way to give physicians more information to help them treat their patients,” said Phil Lovas, a Republican who sponsored the bill while he was a member of the Arizona legislature.

The pharmaceutical industry did not formally lobby on behalf of the bill, although it has called for a revision in the FDA policies on communications about off-label uses.

Some critics say the Arizona law is meaningless because states cannot preempt federal law and because they don’t believe pharmaceutical companies will promote off-label uses unless given more direction from either the FDA, Congress or higher courts.

But the Goldwater Institute insists the federal law prohibiting drugmakers from promoting off-label use is unconstitutional. The group points to two rulings, one in 2012 and the other in 2015, in which federal courts in New York found that the FDA restriction violated the free-speech provisions of the First Amendment.

The Goldwater Institute also was behind another recent issue involving prescription drugs: what is called the “right-to-try” laws that give desperately ill patients the opportunity to receive promising experimental drugs that do not yet have FDA approval. Since 2014, 37 states have adopted right-to-try legislation, although critics too said at the time that those laws didn’t supersede federal law, which sharply restricts the dissemination of experimental drugs.

But the state laws did create momentum, which may have contributed to passage of a right-to-try bill in the U.S. Senate this summer. “I firmly believe state activity with right-to-try pushed it forward at the federal level,” said Lovas, who left the Arizona legislature in the spring to take a position in the Trump administration. “I’d like to see the same thing happen with this.”

It might. U.S. Reps. H. Morgan Griffith of Virginia and Brett Guthrie of Kentucky, both Republicans, filed separate bills this spring to ease the flow of information on off-label drugs. The House held a hearing on the bills in July but has taken no action since.
Per FDA Commissioner Scott Gottlieb:

Complex drugs comprise high cost medicines like metered dose inhalers used to treat asthma, as well as some costly injectable drugs. These medicines generally have at least one feature that makes them harder to “genericize” under our traditional approaches. As a consequence, these drugs can face less competition. In some cases, costly, branded drugs that are complex drugs have lost their exclusivity, but are subject to no generic competition.

When considering the scope of complex drugs, people often first think of drug products where the active ingredient itself is complex. Glatiramer acetate injection, a drug used in the treatment of multiple sclerosis, is a good example. However, the terms “complex drug product” and “complex generic drug” are used to refer to a much larger and diverse group of drug products. In addition to drug products with complex active ingredients, or sites of action, complex drug products also include complex drug-device combination products.

Together, this diverse collection of drug products has one or more elements that are more complex than an average drug product. This complexity, in turn, means that the scientific and regulatory pathways for approval of generic versions of these drug products are not as well traveled by generic drug developers. In some cases, use of another established regulatory pathway may be appropriate to streamline development.

Bioequivalence for complex generic drugs can be challenging with complex drug products that can’t be easily measured in the blood, or when the drug’s therapeutic effect is delivered locally to a particular organ, rather than systemically, through the bloodstream.  In other instances, showing active ingredient sameness can be challenging when the drug product contains an active mixture of components and not a single active molecule.

We recognize these problems and are taking a number of new steps to support the development of high quality ANDAs for complex generic drugs.

First, FDA is issuing a draft guidance to assist ANDA applicants and prospective ANDA applicants in creating and submitting pre-ANDA meeting requests, including meeting package materials, so FDA can give better advice to sponsors looking to develop complex generic drugs.

The guidance provides information on requesting and conducting product development meetings, pre-submission meetings, and mid-review cycle meetings with FDA. These meetings will allow for enhanced communication between generic drug applicants and FDA early in the generic drug development process, allowing for more efficient generic drug development, review, and approval pathways. We’ve found from analyzing our new drug program, that early and better meetings between FDA and sponsors can improve development timelines. We want to bring these same types of opportunities to developers of complex generics.

Second, we’re issuing a draft guidance  to help applicants determine when submission of ANDAs for certain complex products, known as peptides, would be appropriate. Peptides are compounds made up of 40 or fewer amino acids, the building blocks of proteins. There are a number of branded medicines that are peptides, where exclusivity has lapsed, but these drugs face little or no competition. This new guidance applies to ANDAs for certain specific synthetic peptides, namely, glucagon, liraglutide, nesiritide, teriparatide, and teduglutide, that reference brand-name versions of these peptides manufactured using recombinant DNA technology.

We’re doing all of this without sacrificing the scientific rigor of the process one bit. A central aspect of our approach, and our efforts to spur innovation and generic competition, is focused on adopting more rigorous and sophisticated science, including sophisticated quantitative methods and computational modeling, in drug development, evaluation, and review.

We’ll soon release other important policies aimed at spurring competition to complex drugs. But we know that better guidance isn’t the only answer. Some drugs lack generic competition because they cannot be measured through traditional in vivo bioequivalence methods and there’s no efficient and convincing bioequivalence test method available.

In these instances, an applicant needs to conduct more extensive clinical endpoint testing to show bioequivalence of a generic drug to a brand-name drug. This can be burdensome and discourage generic product development. A further barrier to generic competition for certain complex drug products is the lack of established methods for showing the sameness of the active ingredient of a proposed generic drug to a brand-name drug for certain complex drugs.

Over the next year, FDA’s generic drug regulatory science program will work to identify gaps in the science and develop more tools, methods, and efficient alternatives to clinical endpoint testing, where feasible. To help with this task, we’re holding a series of important scientific workshops, beginning today, that will identify opportunities for complex generic drug development, discuss quantitative modeling approaches and principles and aid product-specific guidance development. The workshops will also help in the development of new analytical tools that will help overcome the unique development and regulatory challenges for demonstrating active ingredient sameness in complex products. We intend for these efforts to speed product development, reduce development costs, and improve access to these products.

Scott's full announcement can be found here.
Lay down with dogs, wake up with fleas.

Now replace “dogs” with Prescription Benefit Managers” and “fleas” with lawsuits and you’ve got a pretty good idea of what’s driving the Pfizer/Johnson & Johnson story. But there’s more to it than money.


In brief, Pfizer has filed a complaint against Johnson & Johnson, claiming J&J was taking anticompetitive steps to block the sale of Pfizer’s drug Inflectra. 

(Inflectra is Pfizer's version of J&J's blockbuster drug Remicade — which treats autoimmune diseases like rheumatoid arthritis and Crohn's disease. Approved in 1998, it generated $4.8 billion in sales for J&J. Pfizer and its partner Celltrion got its biosimilar version of Remicade, called Inflectra, approved in April 2016. The two drugs are both versions of infliximab.)

At launch, Pfizer priced Inflectra at a 15% discount to Remicade's list price of $1,113 a vial.  That’s the idea behind biosimilars right, safety, efficacy – and competition to drive down costs. Keep reading.

Per Pfizer’s lawsuit, Remicade still retains 96% of the market. Pfizer’s assertion is that’s because of contracts between J&J and health insurers that require Remicade — as opposed to Inflectra — to be used first before trying other treatments for new patients.

Anti-competitive? That’s for the court to decide. But should insurers be able to block patient access for profit-driven purposes– by contract? Optimizing best practice is one thing. Venality is something else.

Wait, it gets worse. As part of the J&J contract, insurers had to commit to not reimbursing for Inflectra. And since insurers won't cover Inflectra, hospitals (according to Pfizer) don't want to keep it in stock.

Anti-competitive? Per Pfizer, “… due to J&J’s exclusionary conduct, competition has been foreclosed. J&J maintains its monopoly and has continued to capture over 96 percent of infliximab sales even while maintaining prices far above competitive levels."

Inflectra originally came out at 15% discount to Remicade but Pfizer has cut the price as the market has changed. A Pfizer spokesman said last week that the product is now priced at a 35% discount to Remicade’s wholesale acquisition cost. Also the Average Sales Price (ASP --the net price) for Inflectra and Remicade are trending in opposite directions, since launch of Inflectra ASP for Remicade has gone up while ASP for Inflectra is trending down.

As we debate drug pricing, consider this, CMS could save $140 million annually if most of their eligible patients used Inflectra rather than Remicade. It’s important to note that Inflectra has been not been approved as interchangeable with Remicade, but it does not mean (in a regulatory sense) that one product is in any way superior (in a therapeutic sense) to the other. So, why are payers so willing to block the less expensive, clinically equivalent product for new patients? The answer seems to be … because insurers can make more money by effectively maintaining a Remicade monopoly.

Is an insurer-driven monopoly good for patients? Will it lower the co-pay or co-insurance for a single patient? Sadly, these are rhetorical questions.
Is it sounding anti-competitive yet? What about anti-patient? At a time when we are debating both the price and the value of medicines, what’s wrong with this picture?

Here’s what Dominic Caruso, Johnson & Johnson’s Chief Financial Officer said at the Morgan Stanley Healthcare Conference on September 13th:

“ … relatively speaking, the economic incentive is small because the biosimilars … indicated 35% off list. And with Remicade being in the market already for many, many, many years, the way rebates go in the pharmaceutical market, we’re already there.”

But, in terms of “doing the right thing,” is “there” where we really want to be?

J&J’s response to the Pfizer lawsuit, "We are effectively competing on value and price and to date.”

But how do you “compete” if you don’t allow the other team on the field?

At the end of the day, the most important question is, will this lawsuit help or hurt patients? In the long term it will help if it reveals the venality of a rebate-driven reimbursement system. That way we can aggressively (and a lot more honestly) commence the conversation about pricing medicines based on real world value.

Oyez, Oyez.

War Against the Orphans

  • 09.20.2017
  • Robert Goldberg
Great piece in the Weekly Standard by former HHS General Counsel Mike Astrue about the well-organized war against people with rare diseases.  What Mike doesn't note is that the war is being financed largely by the Laura and John Arnold Foundation.   More on this connection after Rosh Hashana.  

Gottlieb Gets Real ... World Evidence

  • 09.20.2017
  • Peter Pitts
Yesterday, at a National Academy of Sciences workshop on Real World Evidence, FDA Commissioner Scott Gottlieb expressed the agency’s commitment to advancing the use of RWE, defended the idea that data from clinical experience should be incorporated into regulatory decisions, and acknowledged that the agency won’t have the last word when it comes to interpreting real world evidence.

BioCentury reports that Gottlieb took on critics who say FDA should only consider data from randomized, controlled trials. “For those who’d challenge the suitability of our effort to incorporate real world evidence into our regulatory model, I’d challenge you with the opposite intention: Should a product be marketed based on a data set that speaks to a limited and rigidly constructed circumstance, when the clinical use, and in turn the evidence we might have to evaluate the product, could have been far richer, far more diverse, and more informative?”

RWE is essential to making FDA’s decisions relevant to entire healthcare system, Gottlieb said. He noted that data gathered from routine clinical experience is already being used to make medical, payment and coverage decisions. “We need to close the evidence gap between the information we use to make FDA’s decisions, and the evidence increasingly used by the medical community, by payers, and by others charged with making healthcare decisions.”

In a move that is unusual for a regulator, Gottlieb acknowledged that FDA’s policies on and interpretation of RWE may not be definitive. “FDA needs to think of itself as a curator of information, not just an arbiter, where a single truth standard is secured to a fixed orthodoxy.” He added: “There’s often no single truth standard when it comes to the evidence used to support medical decisions.”

Gottlieb placed RWE in the context of a regulatory life cycle that extends well beyond product approval. “No product is all risky and uncertain one day, and completely safe and effective the next,” he said. “We can’t allow our need for a point of regulatory accountability to prevent us from looking across the line we have to draw, at practical information that’s collected both before and after our point of demarcation, when a product gains a license for initial market entry."

Getting more reliable RWE will require changes in the way clinical data is collected, Gottlieb said, including a shift from electronic health records designed primarily to support billing to records that routinely capture information about what is happening with patients. He also committed FDA to take steps to provide more clarity about the requirements for using RWE in regulatory submissions.

Vinay Prasad's Fake Pharma Numbers

  • 09.19.2017
  • Robert Goldberg
Attempting to discredit the $2.6 billion drug development cost a developed by Joseph DiMasi is a long-standing tradition among those who think that pharma is too profitable and greedy. [i]

But why contend with the DiMasi numbers and submit your analysis to a leading economic journal when you can just fabricate your own lowball estimates and get published in a second-tier medical journal run by your friends and allies in the war against Big Pharma?

That’s what Vinay Prasad and Sham Mailankody did when they published Research and Development Spending to Bring a Single Cancer Drug to Market and Revenues After Approval in JAMA Internal Medicine.  The study looks at 10 small biotech companies that successfully developed a cancer drug over the past 15 years, The authors conclude that on average it costs $648 million (not including capital costs) to develop a drug to generate an average of $7 billion in revenue.   They also claim that “sales of these 10 drugs since approval was $67.0 billion compared with total R&D spending of $7.2 billion.” 

In a shot at DiMasi, Prasad and Sham claim “this analysis provides a transparent estimate of R&D spending on cancer drugs and has implications for the current debate on drug pricing.”

In fact, the article consists of falsehoods, carefully constructed to fit that narrative. And that’s not including many of the study’s methodological flaws such as inflating all prior spending and revenues to 2017 dollars and using a low cost of capital (7 percent) when the cost of capital for biotech is closer to 16-20 percent.

Far worse is the outright distortion of data to reach a preordained conclusion. To get to $67 billion in revenues from $7.2 billion in R&D, the authors had to count the proceeds of acquisitions as product sales. They included Pfizer’s acquisition of Medivation for $14 billion, Takeda’s purchase of Ariad for $4 billion, Abbie Vie’s acquisition of Pharmacyclics for $22 billion.   

Next, the authors understate R&D expenditures. (To find that data and other information the authors “reviewed publicly available SEC 10-K filings, available at the SEC website ...and all expenses listed as R&D were totaled for the cumulative duration of R&D for each drug.”)

In fact, after reviewing the same 10-K filings it is clear the authors deliberately exclude R&D for expanded uses of the approved drug, post-marketing studies and trials needed for approvals in other countries.  They also exclude any R&D spending for new projects even though the revenues of the approved drug were being used to fund those efforts.

The charts below take the data from the 10K reports of the companies the authors surveyed and states it as reported to the SEC. Absent the Enron style accounting of the authors, the data is a more truthful representation of the total R&D and profits (or losses) the companies generated individually and as a ‘portfolio’.  


Whereas the authors want you to believe there is a $60 billion profit from R&D in fact, only 2 of the 10 companies had cumulative profits. As a ‘portfolio’ the group lost money and spent 66 percent of gross profits on R and D. Prasad and Sham claim that it’s only 10 percent of revenues.

Further, the authors are conspicuously uninterested about what companies did with revenues from approved products. In fact, every company increased R&D and spent more on production facilities over the years reviewed. As I noted, much of the added spending went to finding new therapeutic uses for their products, as well as completing post-marketing studies and trials to obtain approval overseas. Ignoring that R&D investment is also hypocritical since the purchase price of the companies that the authors misleadingly count as revenue were based on the pipeline and the platform producing the each firm's approved drug.

Indeed, an objective editor of a journal of economics would have caught this intellectual malfeasance. More broadly, an editor might have if developing new drugs is anywhere from 75 to 90 percent cheaper than reliable and reproducible estimates of about $2 billion, why haven’t more companies jumped in? If these activists have cracked the code of drug development set up a company and sell drugs at their “just price” (slightly above the cost of production) why haven’t venture capitalists funded their startup? Because the model the authors construct is based on lies that promote a fiction that cannot be found in the real world.

But that’s the point. The depiction of profitability especially among the smaller companies that are the largest source of new medicines is deliberately deceptive. It is designed to replace objective truth with a narrative and hard evidence with soft propaganda.

The article should be retracted, but that’s unlikely. Prasad discloses that he receives funding from the Laura and John Arnold Foundation. So does ICER. That connection is important because Rita Redberg, the editor of JAMA Internal Medicine is also working for ICER and her position is largely possible because of Arnold funding as well. Moreover, Redberg wrote an article with Prasad to support ICER’s position on the price of specific medicines and supports Prasad’s assertion that most cancer drugs are not really that effective.

The Prasad and Redberg collaboration, including the use of medical journals as outlets, is part of a bigger effort and group of activists funded by the Arnold Foundation.  In addition to Prasad and ICER (and others), the Arnold Foundation is funding media outlets to spread these mistruths once they are placed in medical journals friendly to the cause. The goal is to replace objective truth with a narrative in which the enlightened Arnold acolytes tell the rest of us what drugs should cost, what medicines we should use and what lives are worth saving. 

[i] http://csdd.tufts.edu/news/complete_story/tufts_csdd_rd_cost_study_now_published
Where is the FDA going with off-label speech? Here’s what Commissioner Gottlieb had to say last week:

“It’s very clear right now that the courts recognize commercial free speech as constitutionally protected, and it’s very clear that the agency has lost a series of First Amendment challenges … What I want to make sure is that we have a legally enforceable set of rules that we’re operating from that we’re able to use to promote our public health goals. So we need to have clear regulation that is legally sustainable and we need to enforce against that vigorously.”

“To the extent that we have certain regulatory parameters that either we feel or others feel is in conflict with the court’s interpretation of what constitutes commercially protected speech and the cope of FDA’s ability to regulate that, we need to resolve that. We can’t be operating from a platform where our regulations might be in perpetual conflict with the courts and then we are reluctant to take action for fear that we might run afoul of the courts. We need to have clear regulation that is aligned with the interpretations of the courts around what is and what isn’t permissible and we need to enforce vigorously against that.”

Key phrase, “We need to have clear regulation.” That’s as welcome news as it is unusual since (when it comes to regulating speech), the agency’s default proposition has been vigorous ambiguity.

The Commissioner’s statement also seems to throw onto the dustbin of history, the agency’s memo (issued in the waning days of the Obama administration) Public Health Interests and First Amendment Considerations Related to Manufacturer Communications Regarding Unapproved Uses of Approved or Cleared Medical Products, which asserted FDA's stance against off-label communications.

Gottlieb-watchers understand his support of making sure physicians and patients have access to truthful accurate and non-misleading information about FDA-approved medicines –- both on and off-label. Time marches on and regulatory practices must evolve to better serve the public health.

Off-label communications is about getting the right medicine to the right patient in the right dose at the right time.  Off-label communications advances both the practice of medicine and the safe and effective use of medicines.

Stay tuned.

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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