IG10013 — The Pharmaceutical Drug Development Process

/ THE PHARMACEUTICAL DRUG DEVELOPMENT PROCESS The pharmaceutical drug development process includes three stages: research and development (R&D), approval, and postmarketing. On average, drugs take 10-15 years from discovery to approval. Before a drug can be marketed in the United States, it must be approved by the Food and Drug Administration (FDA). To obtain approval, the manufacturer submits to FDA a new drug application (NDA) or a biologics license application (BLA) containing safety and e_ectiveness data generated in preclinical and human clinical trials. FDA also has a number of programs to expedite development and review of drugs that address unmet medical need. Costs facing drug manufacturers include the cost of R&D, application fees, post-market studies, and advertising. There are widely ranging estimates for clinical trial costs, depending on the therapeutic area and study’s assumptions. This infographic uses clinical trial cost estimates from a 2014 study conducted under contract to the Department of Health and Human Services.* To help o_set these costs and incentivize drug development, the federal government o_ers pharmaceutical manufacturers orphan drug and R&D tax credits, as well as research deductions. While comprehensive data on use of these credits and deductions by the industry are not available, CRS analysis shows that the R&D tax credit can be a signi_cant tax subsidy, resulting in negative tax rates in some cases. In addition, there is a federal tax deduction available for business advertising expenses. RESEARCH & DEVELOPMENT APPROVAL POSTMARKETING The study of the fundamental mechanisms of biology and behavior. Leads to knowledge of disease/condition that aids in drug development. Research on potential drug candidates, usually using lab animals, cell cultures, samples of human/animal tissue, and/or computer models. CLINICAL RESEARCH Phase I Clinical Trials Participants: 20-100 Purpose: safety and dosage Length of study: several months Average cost: $4 million ($1.4-$6.6 million) Phase 2 Clinical Trials Participants: 100s Purpose: e_ectiveness and side e_ects Length of study: 2 years Average cost: $13 million ($7-$19.6 million) Phase 3 Clinical Trials Participants: 1,000s Purpose: e_ectiveness and monitoring adverse events Length of study: 1-4 years Average cost: $20 million ($11.5-$52.9 million) Application Submission NDA or BLA is submitted to FDA. For FY19: Application fee = $2.6 million/application Annual program fee = $309,915/approved drug Application Review Goals Standard review= 10 months Priority review= 6 months Application Approved Application is not Approved Drug is marketed and sold by company Basic Research Preclinical Research Phase 4 Clinical Trials or Studies Participants: 1,000s Purpose: e_ectiveness and monitoring long-term e_ects Average cost: $20 million ($6.8-$72.9 million) FDA _les (or refuses to _le) NDA/BLA within 60 days Iterative Process Prepared by Agata Dabrowska (Analyst in Health Policy), Kavya Sekar (Analyst in Health Policy) and Jamie Hutchinson (Visual Information Specialist). For more information see CRS Reports R41983, R44832, R44620, IF11083, and *Eastern Research Group, Examination of Clinical Trial Costs and Barriers for Drug Development, (July 2014). Note: New drugs are often shielded from competition for a number of years due to patents and regulatory exclusivities. 0 10 20 30 40 50 60 70 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 MOVE ONTO NEXT PHASE Development: use of research for new or improved goods, services, or processes. Applied Research: conducted to meet a commercial objective or practical aim. Basic Research: developing new knowledge; no speci_c application. Pharmaceutical and Medicines Industry (CY2016 spending, domestic R&D only) National Institutes of Health (FY2016 Obligations) $41.54 $13.71 $15.56 $9.23 $15.14 Discovery Identi_cation of chemical or living compounds capable of managing or curing a disease. Source: IQVIA Institute, “Medicine Use and Spending in the U.S.: A Review of 2017 and Outlook to 2022” Source: L.M Schwartz and S. Woloshin, “Medical Marketing in the United States, 1997-2016,” JAMA, 2019, 321(1), p. 80-96. Note: Novel drugs include new molecular entities approved under NDAs and new therapeutic biologics approved under BLAs. The active ingredient(s) in a novel drug has never been approved in the U.S. 70% 33% 25%-30% TOP 5 DRUGS BY REVENUE IN 2017 JANUVIA REMICADE HARVONI ENBREL HUMIRA Billions of dollars $5.0 $5.4 $6.0 $8.7 $16.9 RESEARCH AND DEVELOPMENT BY SECTOR Investigational new drug application (IND) is submitted to FDA The pharmaceutical drug development process includes three stages: research and development (R&D), approval, and postmarketing. On average, drugs take 10-15 years from discovery to approval. Before a drug can be marketed in the United States, it must be approved by the Food and Drug Administration (FDA). To obtain approval, the manufacturer submits to FDA a new drug application (NDA) or a biologics license application (BLA) containing safety and e_ectiveness data generated in preclinical and human clinical trials. FDA also has a number of programs to expedite development and review of drugs that address unmet medical need. Costs facing drug manufacturers include the cost of R&D, application fees, post-market studies, and advertising. There are widely ranging estimates for clinical trial costs, depending on the therapeutic area and study’s assumptions. This infographic uses clinical trial cost estimates from a 2014 study conducted under contract to the Department of Health and Human Services.* To help o_set these costs and incentivize drug development, the federal government o_ers pharmaceutical manufacturers orphan drug and R&D tax credits, as well as research deductions. While comprehensive data on use of these credits and deductions by the industry are not available, CRS analysis shows that the R&D tax credit can be a signi_cant tax subsidy, resulting in negative tax rates in some cases. In addition, there is a federal tax deduction available for business advertising expenses. TOTAL FDA’S CENTER FOR DRUG EVALUATION AND RESEARCH NOVEL DRUG APPROVALS _NDAs AND BLAs_ In 2016, pharmaceutical companies spent $20.3 BILLION on marketing to health care professionals and $6 BILLION on direct-to-consumer advertising Billions of dollars Source: CRS analysis of National Science Foundation (NSF) Business, Research, Development and Innovation Survey data and Federal Funds for Research and Development Survey data Note: This _gure is for illustrative purposes only and is not a comprehensive accounting of all R&D by federal agencies or industry related to pharmaceutical drug development. In 2018, of the 59 novel drug approvals, 43 (73%) were designated in at least one expedited program.

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