Pharma_1 - Pharmaceuticals I PAM 435 April 1 2008 This...

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Pharmaceuticals I PAM 435 April 1, 2008
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This Week’s Objectives 1) Today: view the world from a pharmaceutical firm’s perspective - how are new drugs developed? - how long does it take and how much money is required to develop a new drug? - what is the government’s role? - why do drugs have patent protection? - why do firms spend so much on marketing? - is the industry really that innovative? 2) Thursday: Policy issues in the pharmaceutical industry
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Origins of the Pharmaceutical Industry A relatively new industry Chemical companies were the early players 1897 Bayer (German chemicals co.) created aspirin Products originally derived from natural substances Chemistry is the main R&D skill Small family firms developed by pharmacists, herbalists and physicians these small firms still exist in Germany, France, Japan
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The New Technology Revolution 1980s and 1990s: breakthroughs in basic science microbiology genetics and the human genome project recombinant proteins, monoclonal antibodies, etc. Pharmacogenomics New R&D technologies combinatorial chemistry high throughput screening bioinformatics => potential for new drug targets and products; industrialization of R&D; transformation of firms and industry structure
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Net Cost: $802 Million Invested Over 12-15 Years 5,000–10,000 Screened 250 Enter Preclinical Testing 5 Enter Clinical Testing 1 Compound Success Rates by Stage New Product Development – a Risky and Expensive Proposition Source: PhRMA Pharmaceutical Industry Profile 2003, Chapter 1: Increased Length and Complexity of the Research and Development Process. DiMasi, JA, Hansen, RW, Grabowski, HG. “The Price of Innovation: new estimates of drug development costs.” J Health Economics . 2003:22:151-185. Approved by the FDA FDA Review Approval FDA Review Approval Phase II Phase II 100–300 Patient Volunteers 100–300 Patient Volunteers Used to Look for Efficacy Used to Look for Efficacy and Side Effects and Side Effects Preclinical Testing Preclinical Testing Laboratory and Laboratory and Animal Testing Animal Testing 16 14 12 10 8 6 4 2 0 Discovery (2–10 Years) (2–10 Years) Phase I Phase I 20–80 Healthy Volunteers Used to 20–80 Healthy Volunteers Used to Determine Safety and Dosage Determine Safety and Dosage Phase III Phase III 1,000–5,000 Patient Volunteers 1,000–5,000 Patient Volunteers Used to Monitor Adverse Used to Monitor Adverse Reactions to Long-Term Use Reactions to Long-Term Use Additional Post- Additional Post- Marketing Testing Years Years
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12.3 19.5 26.0 29.3 33.8 32.9 18.2 16 0 120 Pharma Biotech Months Phase I Phase II Phase III RR Clinical Development and Approval Times 97.7 90.3 Source: DiMasi and Grabowski, Managerial and Dec Econ 2007, in press
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71.0%
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