ro-bust clinical trials as a basis for a marketing application, they orchestrate flimsier stud-ies that they use as marketing tools to promote off-label use by doctors.
676As we already saw, customary practices allow physicians to prescribe drugs for therapeutic indica-tions not approved by a drug agency (“off-label use”).
677Hence, a pharmaceutical firm may make considerable profits out of such sales.
678For the firm, the main disadvantage is that patients buying the drug for the unapproved indication may not be reimbursed by their insurance companies,
679thus limiting the size of the market.
673 ROBERT BAZELL, HER-2, THEMAKING OF HERCEPTIN, A REVOLUTIONARY TREATMENT FOR BREAST CANCER, 49 (Random House 1998).
674 See MURDOCK & FISHER,supra note 672, at 115-16 (Crown Publishers 2000). Rick Murdock, author of the book and CEO of CellPro, was diagnosed with an aggressive lymphoma. When chemotherapy failed, he em-barked on an investigational treatment of stem cell transplant, assisted by an even more investigational de-vice invented by his own firm. The combination of these two treatments was successful. He wrote: “Most science is dispassionate. At CellPro we rarely had any direct contact with the human beings who might benefit – or die – from the success or failure of our work. In the development of the Ceprate system [their investigational device], patients were simply the end product, statistics we needed to move forward with out clinical trials or to get final FDA approval to go to market. None of those people had a name or a face, we didn’t know anything about their families or their hopes and dreams. The doctors conducting our clinical tri-als sent us reports – this many patients showed improvement, that many patients failed to respond to treatment. It’s easier to go home at night when you don’t know the patients’ names. I was changing the rule.” Id. at 116-17.
675 BAZELL,supra note 673, at 51. At Genentech, Bill Young, a vice president in charge of manufacturing, pushed for clinical trials to be conducted on Her-2 when his mother was diagnosed with breast cancer. Brazell notes that: “Genentech presented itself as a sophisticated corporation that had outgrown the rashness of an up-start and made rational decisions based on sound business principles. But the truth was that passionate in-terest in a project, especially from someone with a voice in the financial decisions, was critical to the equa-tion [whether or not to fund a trial].”
676 See, e.g., Melody Petersen, Court Papers Suggest Scale of Drug's Use, N.Y. TIMES, May 30, 2003, at http://www.nytimes.com/2003/05/30/business/30DRUG.html?pagewanted=2&tntemail1 (“Warner-Lambert paid dozens of doctors tens of thousands of dollars each to speak to other physicians about how Neurontin, an epilepsy drug, could be prescribed for more than a dozen other medical uses that had not been approved by the Food and Drug Administration. The top speaker for Neurontin, Dr. B. J. Wilder, a former professor of neurology at the University of Florida, received more than $300,000 for speeches given from 1994 to 1997, according to a court filing. Six other doctors, including some from top medical schools, received more than
$100,000 each. Other doctors were paid to write reports on how Neurontin worked for a handful of their pa-tients, the court papers said. Still others were paid to prescribe Neurontin in doses far exceeding the ap-proved levels as part of a clinical trial that Warner-Lambert created to market the medicine, according to the court papers, which are new documents filed in the lawsuit by the whistle-blower.”).
677 See subsection 3.4.4. above. Usually, the drug has at least one approved use, allowing it to be sold legally on the market.
678 “Some observers have estimated that approximately half of all prescriptions represent uses not approved by the FDA.” Noah, supra note 4, at 397 (listing also the reasons behind legislative acceptance of off-label uses).
679 However, insurance companies may be unable to tell whether or not a drug is prescribed for an approved use without implementing far-reaching controls. For more details as to when drugs not on the FOPH's List of Specialities are to be reimbursed, see ATF 130 V 532.
4.2. Economic issues in clinical trials 4.2.1. Costs of clinical trials
4.2.1.1. Number and length of trials
Each year in the United States, an estimated 50,000 to 80,000 clinical trials take place;
680they enroll between 700,000
681and 20 million subjects.
682According to a 1996 survey, 41 pharmaceutical companies had a total of 350 new active substances in advanced clinical trials.
683A 2002 survey found that 371 biotech drugs were in various stages of develop-ment in the United States.
684In contrast, the European Union had only about 100 bio-tech medicines under clinical trial, most of them in early phase trials.
685For the last 10 years or so, U.S. pharmaceutical R&D figures far exceed those of the European Union.
686There is no set number of clinical trials necessary to support the marketing appli-cation of a new drug; the average varies between 14 and 37.
687The average number of
680 See Jill Wadlund, Heading Off a Clinical Trial Liability Lawsuit, APPLIED CLINICAL TRIALS at 51 (Apr. 2003), at http://www.chubb.com/businesses/cci/chubb1165.pdf. See also Diana L. Anderson, The Patient Recruitment Market, An Overview of Today’s Issues, APPLIED CLINICALTRIALS, (Nov. 2003), at
http://www.actmagazine.com/appliedclinicaltrials/article/articleDetail.jsp?id=77707.
According to FDA statistics, the agency received 2120 original INDs (Investigational New Drug applications) in 2003. See FDA, Original INDs Received, supra note 596. However, this high figure also includes use of in-vestigational drugs outside clinical trials, for example in the context of a “Treatment IND.” See FDA, Investi-gational New Drug Application, at http://www.fda.gov/cder/handbook/indbox.htm.
681 According to a CenterWatch analysis for the United States territory, out of 2,8 million that complete the initial screening to determine eligibility, only 700,000 can be enrolled. CenterWatch, a word from study volunteers, sample at http://www.centerwatch.com/bookstore/samples/wordstudy.pdf [hereinafter CenterWatch (Word from)].
682 There are no official statistics and estimates vary widely. Slater indicates that the “number of participants in federally funded research increased from 7 million to almost 12 million” from 1997 to 2000. Eve E. Slater, IRB Reform, 346 NEW. ENG. J. MED. 1402-1404 (May 2, 2002), at
http://content.nejm.org/cgi/reprint/346/18/1402.pdf. See also Daniel D. Federman, Minimizing Risk in Clini-cal Research, Editorial, 139 ANN. INTERN. MED. 71-72, (July 1, 2003), at
http://www.annals.org/cgi/reprint/139/1/71.pdf (“Published figures for the United States range from 2 000 000 to 20 000 000.”).
In France, according to one source, at least 800,000 subjects participated in research in 1996. See CCNE N°58,supra note 117, at 12.
683 IBM Business Consulting Services, Pharma 2005, An Industrial Revolution in R&D, at 6, at
http://www-1.ibm.com/services/au/igs/pdf/gw510-9220-pharma-2005-industrial-revolution.pdf (referring to a study of Phase II and III clinical trials by CMR International). See also PhRMA (Industry Profile 2003), su-pra note 601, at 16-17.
684 See PhRMA, 2002 Survey, New Medicines in Development, Biotechnology, at http://www.phrma.org/newmedicines/resources/2002-10-21.93.pdf.
685 See European Parliament, Committee on Industry, External Trade, Research and Energy, Report on the Future of the Biotechnology Industry, (Feb. 28, 2001), (A5-0080/2001; PE 297.119), at 19, at http://www.botanischergarten.ch/debate/PurvisReportProv.pdf [hereinafter E.U. (Future)].
686 See, e.g., PhRMA (Industry Profile 2003), supra note 601, at 10.
687 These figures include small exploratory trials. According to a study by Toigo et al., for the 185 new molecular entities (i.e., wholly new drugs) approved between 1995 and 1999, there were a corresponding 2,581 clini-cal trials. See Evelyn B. Toigo et al., Women’s Participation in Cliniclini-cal Trials and Gender-Related Labeling: A Review of New Molecular Entities Approved in 1995-1999, Office of Special Health issues at the FDA, at http://www.fda.gov/cder/reports/womens_health/women_clin_trials.htm.
According to CMR International, a submission for marketing approval for a new active substances contains an average of 37 clinical trials, most of them (21) being Phase I studies. See CRM International, Describing Dossiers: Characterising Clinical Dossiers for Global Registration, 25 R&D BRIEFING, (Jan. 2000), at
subjects throughout the drug’s development is about 4,000.
688The pharmaceutical in-dustry has been blaming the drug agencies, particularly the FDA, for being ever more demanding. According to the industry, the FDA insists on longer and larger clinical trials. Partly for this reason, clinical costs are said to have soared since the 1970s (multi-plied by an 8.6 factor).
689The industry complains because the trial’s length is a strong determinant of clinical costs. Yet, the true length of clinical development is also a controversial subject.
690Over 2000 and 2001, the average duration of clinical development was of about 5 year.
691Be-sides, the length of a given trial may influence either the length of other trials required to secure regulatory approval or the duration of the regulatory review. If trials submit-ted to the drug agency did not monitor the drug during a sufficiently long period, the agency may require additional trials. Performing these additional trials will lead to sig-nificant delays. The review of the application by the drug agency may also be slowed down if it has to examine partly overlapping studies.
692Unforeseen delays are dreaded, since, “[f]or each day’s delay in gaining FDA ap-proval of a drug, the manufacturer loses, on average, $1.3 million.”
693Even if this figure seems inflated, delays have multiple adverse consequences, including on the com-pany’s stock valuation
(see also subsection 4.1.8. above).
694Therefore, the extra time spent on devising a strong clinical trial may ultimately save time on other aspects of the drug development process.
http://www.cmr.org/pdf/25.pdf [CRM (Describing Dossiers)]. However, the number of clinical trials per appli-cation may be decreasing. Id. at 2-3.
688 See id. See also Joseph A. DiMasi et al., The price of innovation: new estimates of drug development costs, 22(2) J. HEALTH ECONOMICS 151, at 177, n.41 (Mar. 2003).
689 See Tufts Center for the Study of Drug Development, Total Cost to Develop a New Prescription Drug, News Release, (May 13, 2003), at http://csdd.tufts.edu/NewsEvents/RecentNews.asp?newsid=29 [hereinafter Tufts (May 13, 2003)].
690 See, e.g., Roy Levy, The Pharmaceutical Industry, A Discussion of Competitive and Antitrust Issues in an Environment of Change, Bureau of Economics Staff Report, Federal Trade Commission, at 184 (Mar. 1999), at http://www.ftc.gov/reports/pharmaceutical/drugrep.pdf.
691 In the United States, the exact figure for new small-molecule drugs (excluding proteins and monoclonal antibodies) is 63.9 months in 2000 and 2001. Janice M. Reichert, Trends in development and approval times for new therapeutics in the United States, 2 NATURE REVIEWS 695, 697 (figure 2) (Sept. 2003), at http://www.nature.com/cgi-taf/DynaPage.taf?file=/nrd/journal/v2/n9/full/nrd1178_fs.html&filetype=pdf.
Since 1980, the duration of clinical development has varied from a low of 42.7 months (1980-1981) to a high of 92.5 months (1994-1995). Id. See also OIG (FDA Review), supra note 20, at 2 (stating that FDA review time for new drug applications is now under 20 months).
692 The pharmaceutical sponsor is often the source of the delays, for example because the application initially submitted was incomplete and had to be amended. See OIG (FDA Review), supra note 20, at 15-16.
693 Thomas Bodenheimer, Uneasy Alliance – Clinical Investigators and the Pharmaceutical Industry, 342 NEW. ENG. J. MED. (May 18, 2000), at http://content.nejm.org/cgi/reprint/342/20/1539.pdf. See also Janice Cruz Rowe et al., A Cure for Clinical Trials, THE MCKINSEY QUARTERLY, 2002, Number 2, at 134, at http://www.caplix.com/pdf/Clinical%20Trials.pdf (evaluating the loss to “at least $800,000 a day … for a niche medication … and as much as $5.4 million for a blockbuster like Prilosec”).
694 For instance, Swiss biotech company Actelion lost 60% of its stock market value when it had to announce that its Phase III clinical trial had not demonstrated efficacy. See François Mutter, L'annonce d'essais cliniques décevants fait plonger Actelion de plus de 60%, [Notice of disappointing clinical trials brings down Actelion more than 60%], LETEMPS, Apr. 21, 2001, at 29; Actelion’s press release of April 20, 2001, at http://www.actelion.com/uninet/www/www_main_p.nsf/Content/me+20+Apr+2001.
4.2.1.2. Estimates of total costs
To be sure, clinical trials are very expensive. Before a compound can be approved as a marketable drug, we saw that it has to be tested on thousands of subjects
(see also sub-section 6.1.3. below).
695The medical care that these subjects receive is paid, at least in part, by the sponsor – typically, a pharmaceutical company. Average costs per subject for phase III trials are between $10,000 and $24,000.
696The sponsor must also pay the re-searchers conducting the trial; it must pay for the costs of manufacturing the investiga-tional compound; it must pay to have a report written on the outcome of the study. As a result, clinical trials represent more than half the total out-of-pocket expenses of drug R&D.
697Out-of-pocket costs for clinical trials have been estimated at $282 million (with cost of capital at $467 million).
698However, as signaled above, estimations vary widely.
699The cost of a single clinical trial is subject to important variations, contingent upon its objectives and size among other things; there are no consensual estimates.
700Cost estimates for the entire drug development range between a low $100 million and a high $897 million. The low figure comes from a prominent left-wing pro-consumer group.
701The second figure is given by an equally prominent pro-business
695 For example, Taxol, a blockbuster anti-cancer drug first approved against ovarian cancer, was tested on 28,882 research subjects. See GAO, Technology Transfer, NIH-Private Sector Partnership in the Development of Taxol, at 3, Report to the Hon. Ron Wyden, U.S. Senate, GAO-03-829 (June 2003), at http://www.gao.gov/new.items/d03829.pdf [hereinafter GAO (Taxol)].
696 See Global Alliance for TB Drug Development, The Economics of TB Drug Development, at 54, (Oct. 2001), at http://www.tballiance.org/pdf/Economics%20Report%20Full%20(final).pdf. But see Public Citizen, at http://www.cptech.org/ip/health/taxol/ (“the average cost of a clinical trial was $169,789 to $310,563, de-pending upon the year, with an average per patient cost of $3,861 to $6,202 (dede-pending upon the year)”).
697 The cost, taking into consideration cost of capital, can be lower because clinical trials are initiated towards the end of the R&D process. Since a dollar paid at time “t” costs more than a dollar paid at time “t+10,”
clinical trials expenses “cost less” than earlier pre-clinical expenses.
698 These estimates include the cost of failed projects. See DiMasi et al., supra note 688, at 165 and also at 171-72.
699 See James Love, How much does it cost to develop a new drug, CONSUMER PROJECT ON TECHNOLOGY, (Apr.
2000) [draft paper], at http://www.cptech.org/ip/health/econ/howmuch.html. See also James Love, A Free Trade Area For The Americas, A Consumer Perspective On Proposals, As They Relate To Rules Regarding Intellectual Property, Comments for the Working Group On Intellectual Property Rights, Third Trade Ministe-rial and Americas Business Forum, Belo Horizonte, Brazil, May 1997, James Packard Love, Center for Study of Responsive, http://www.cptech.org/pharm/belopaper.html#novartis.
700 See, e.g., Jeff Gerth & Sheryl Gay Stolberg, Drug Companies Profit From Research Supported by Taxpayers, NEWYORK TIMES, Apr. 23, 2000, at
http://www.nytimes.com/library/national/science/health/042300hth-drugs2.html. See also Grow, supra note 249, at 113.
Estimates of pediatric clinical trial costs also vary considerably. “[The NICHD] estimated that a safety and ef-ficacy study may cost between $1 million and $7.5 million, while the cost of a pharmacokinetic study can range from $250,000 to $750,000 per age group. Limited data provided by PhRMA suggested higher study costs, ranging from under $5 million to more than $35 million. Another study indicated that, based on a sur-vey of drug companies, the cost of pediatric studies averaged $3.87 million per written request.” GAO (Pedi-atric), supra note 608, at 4-5.
701 See Public Citizen, Rx R&D Myths: The Case Against The Drug Industry’s R&D “Scare Card,” at 3, (July 2001), at http://www.citizen.org/documents/ACFDC.PDF (the figure corresponds to the after-tax cash out-lays). Moreover, based on data from the U.S. Orphan Drug Tax Credits, “US pre-tax expenditures on clinical testing, including the costs of failures, was only $7.9 million per approved orphan drug, before tax, and $3.9 million after the benefits of the tax credit.” Consumer Project on Technology (“CPTech”), Costs of Human Use Clinical Trials: Surprising Evidence from the US Orphan Drug Act, (Nov. 28, 2001), at http://www.cptech.org/ip/health/orphan/irsdata9798.html. See also James Love, Novartis Outlays on R&D for Glivec, CPTech, (Sept. 22, 2003), at http://www.cptech.org/ip/health/gleevec/glivec-RND-costs.doc.
and pro-pharma institution.
702One important difference is that the industry’s figure compounds the out-of-pocket expenses with the interest rate on opportunity cost.
Moreover, the rate selected is quite high at around 11% per year.
703Cost of preclinical studies and phase IV trials are also included.
704Also added to this is the quite signifi-cant cost of failure, corresponding to investments on compounds that failed to reach the market.
705Tax deductions for R&D expenditures are not always deducted in the same way in the various estimates.
Member companies of the U.S. PhRMA trade association are reported to have in-vested $32.1 billion in drug R&D in 2002; this would represent a “24-fold increase in just 25 years.”
706Pharmaceutical companies reinvest between 15% and 20% of their reve-nues in R&D.
707An equal, if not higher, share of revenues goes to drug advertising and marketing.
4.2.2. Risks of clinical trials
Clinical trials are not only costly, they are also very risky endeavors. Out of ten com-pounds that are tested in clinical trials, only one or two will make it to the market as an approved drug.
708In general, if 10 compounds were to start phase I clinical trials, 7
See also the low estimate of costs related to the development of a new antituberculosis drug as calculated by the Global Alliance for TB Drug Development, supra note 696.
702 See DiMasi et al., supra note 688, at 161 and at 163-64; Tufts (May 13, 2003), supra note 689.
703 See, e.g., Henry Grabowski et al., Returns on R&D for 1990s New Drug Introductions, at 5-6, (Mar. 2002), at http://www.dklevine.com/archive/grabow-randd_returns.pdf. “One of the authors undertook an informal survey of six pharmaceutical firms in mid-2001 with respect to the hurdle rates that drug firms utilize in their R&D investment decisions. The survey of these firms yielded (nominal) hurdle rates from 13.5% to over 20%.” Id.
704 The other commonly cited figure, also from the Tufts Center, is $802 million, including $403 million in out-of-pocket costs. This estimate does not include phase IV studies. See A. DiMasi et al., supra note 688, at 151-85.See also PhRMA (Industry Profile 2003), supra note 601, at 2 and 5.
705 See Tufts Center for the Study of Drug Development, A Methodology for Counting Costs for Pharmaceutical R&D, (Nov. 30, 2001).
706 PhRMA (Industry Profile 2003), supra note 601, at 10. This $32.2 billion investment was divided between U.S.-based R&D activities ($26.4 billion) and foreign activities ($5.7 billion). Id.
In comparison, the total budget of the NIH (the U.S. National Institutes of Health) budget was $24 billion.
Id. at 11.
According to other estimates, about $6 billion are spent each year for clinical trials. See Dolorez Ruiz Ibar-reta et al., Industry-funded clinical trials in developing countries, background paper prepared for the EGE, at 191 (Oct. 2002), at http://europa.eu.int/comm/european_group_ethics/docs/avis17_complet.pdf [hereinaf-ter Ibarreta et al. (Industry)].
707 See also PhRMA (Industry Profile 2003), supra note 601, at 10.
708 “Research scientists start with ten thousand natural substances or synthetic molecules, which they then check with the help of automatic testing systems such as ultra-high-throughput screening to determine whether they influence or change specific disease-related reactions in the body. Those lacking a desirable pharmacological effect are weeded out, leaving only about a hundred candidates in the field. In further se-lection steps, the remaining hopefuls are tested in cell or organ cultures, e.g. for harmful biochemical
708 “Research scientists start with ten thousand natural substances or synthetic molecules, which they then check with the help of automatic testing systems such as ultra-high-throughput screening to determine whether they influence or change specific disease-related reactions in the body. Those lacking a desirable pharmacological effect are weeded out, leaving only about a hundred candidates in the field. In further se-lection steps, the remaining hopefuls are tested in cell or organ cultures, e.g. for harmful biochemical