New Drug Creation: An Analysis of the Key Components, Considerations, and Costs - PowerPoint Presentation Example

Section/# New Drug Creation: An Analysis of the Key Components, Considerations, and Costs Associated with Such a Process One of the most challenging aspects of bringing any new drug to market is the long, difficult, and exorbitantly expensive process that drug manufacturers and/or research and development institutions must endure as a process of realizing such an end. As a function of seeking to understand the complexities of such process, this brief analysis will consider the research and development costs and the integral components that affect these costs, the legal constraints the bind such development of new prospective drugs, and the ethics considerations that each and every firm or entity involved in new drug development must necessarily consider. As a function of describing and critiquing each of these constraints, this author will analyze each of these factors and attempt to draw a clear level of discussion as a means of identifying the core components and key considerations that must be engaged with as a function of the developmental cycle for new/prospective pharmaceuticals. As a guiding entity of the process, the legal departments of the requisite entities must be continually engaged and aware of the process. This represents an added cost and necessity that each and every pharmaceutical firm engaged in research and development must necessarily incorporate a team of legal experts and lawyers to guide them through each and every process of clinical trials, reporting requirements, paperwork, and associated compliance issues. Ultimately, economic theory dictates that that price discrimination corresponds to the following three market conditions: the power of market sellers, the segmentation and overall price responsiveness of the market, and the direct and indirect potential that exists for arbitrage. With respect to market power, this is a concept which can simply be understood as a function of the ability of the seller to raise its prices as compared to the other sellers that exist within the market. Obviously, in the case of a brand name drug that has recently been cleared by clinical trials and is available to the marketplace, the ability of the seller to raise his/her prices above that of the competition is very high due to the fact that no perfect substitute exists and there is a near perfect monopoly engaged by the given pharmaceutical manufacturer; albeit for a limited amount of time (Gupta et al 2011, p. 15). As a way of understanding such a construct to a more full and complete level, the researcher and/or reader must consider the total cost that is necessitated in bringing a drug to market in the first place in order to gain a more full and complete appreciation and understanding for why such a miniature monopoly is created which allows for otherwise static economic factors to be temporarily suspended. One of the primal issues that is associated with the pharmaceutical market as it exists today is the high cost of current drugs within the system. Many consider this high cost to be non-representative of the overall cost of production that the pharmaceutical manufacturers must expend to create such drugs; however, the fact of the matter is that the actual cost of production of the drugs themselves represents only a small portion of the overall cost of drug creation (Stiglitz & Jayadev 2010, p. 219). This is of course due to the fact that process of approval for any new drug is exorbitantly expensive and with any one given drug the probability of it passing through all three phases of testing and eventually being approved is a mere 8% (CITE). As such, one can begin to understand why there remain such high prices passed along to the end consumer during the period in which the drug is available as a brand name only; i.e. with no generic alternatives. It is during this brief period in time that the drug companies attempt to recoup the necessary expense that they have expended on carrying the drug through all of the clinical trials which have ultimately led to the drug being approved for the market. Although there is no clear representation of the total cost for bringing a drug to market due to the different levels of research and trials that need to be conducted with each and every drug, a rough estimate provided based upon averages indicate that there is around a 126 million dollar investment that must be provided to bring a single drug to market. The cost alone is staggering; however, equally staggering is the amount of time that this process takes. Although providing a solid figure for the amount of time it will take any given drug to proceed through each of the three stages of trials and eventually petition for access to the market cannot be ascertained in definite terms, the average that has been cited by many researchers within the field is anywhere between 11-14 years time (CITE). As with the staggering cost which has previously been discussed, the commitment of years of research and the support of the given firm for such a long period of time represents another difficult hurdle for any pharmaceutical firm engaging in such a process. When one considers other industries that attempt to bring new products to market, an initial price tag of 126 million USD is staggering enough; however, facing the prospect of not having a return on investment up to and even longer than a decade in the future combined with an overall probability of success around 8% represents a statistic that quickly engages the mind of the researcher/reader with the understanding of why the market for pharmaceuticals is dominated by but a few major players and why the current prices for non-generic alternatives is so shockingly high. Due to the fact that these firms usually have several drugs in development at one time and the profitability of the entity is intrinsically linked to the level of approvals that are gained within the given period, the ability of such entities to bring drugs to market indicates that the market for pharmaceuticals will necessarily be dominated by but a handful of multi-billion dollar a year firms who have the market dominance, cash reserves, and established R&D entities to ensure that one or two mishaps will not result in the complete financial ruin of the firm/entity (Malinowski & Gautreauxt 2012, p. 191). This of course represents a fundamental ethical issue with regards to the level to which pharmaceutical firms can and should be allowed to seek to recoup the costs of research and development by passing this along via the high cost of brand name prescription medicines once they become available. However, with regards to the economic theory that is represented in such a situation, it is no different than that of any other good or service that is represented within the market as the fact of the matter is that the entity responsible for creating such a good expects to recoup not only the original cost expended on creating of the good but also develop a level of profit based upon such a long, expensive, and time consuming process. Although the costs that have thus far been related represent something of a necessity for the firms, another added aspect of what this author will term “ethical insurance” exists. Although the process of approval is stringent to say the least, many of the large multi-national pharmaceutical firms are intimately aware of the way in which the ethical ramifications of their product could affect not only the overall profitability of the drug in question but the way in which the firm itself and the rigors they employ could affect the overall profitability and public relations with respect to how the firm is viewed by the general public. A perfect case in point for this would be the drug Vioxx which made it through each and every clinical trial and was approved for usage within the general population. However, as has been noted from history, the drug itself had severe flaws and caused heart issues with a number of patients that were prescribed the drug; ultimately leading to over a dozen untimely deaths. Such a public relations debacle had severe ramifications for Merck and Co.; far beyond the actual loss of profitability for this one drug line (Jin-Jian 2012, p. 4). As a function of this understanding, it has become increasingly important for a level of ethical considerations and additional testing to be performed by the pharmaceutical entity that is outside of the bounds of the already astronomically expensive process of drug approval which has hitherto been detailed. Naturally, thus far, this brief analysis has dealt with the economic realities that engage the market for pharmaceutical testing and drug development on the firm itself; however, there is the alternate vantage point that the end consumer must engage with which necessarily invokes the idea of ethics and fairness. It is at this particular juncture that this analysis must consider the ethical implications that the economic theory and pharmaceutical strategy enumerated upon above necessarily pass along. The unfortunate fact of the matter with regards to the current system is the fact that pharmaceutical companies are ultimately in business to make a profit. This is somewhat complicated by the fact that they operate within the field of primary healthcare provision and as such are expected to behave in a more ethically sensitive way to the demands and needs of their consumer base than would some other non-medically related field (Beach 2012, p. 84). Ultimately, the complication arises due to the fact that the end consumer is sick and possibly dying without the needed intervention of the medicine that the pharmaceutical firm is responsible for providing; thereby creating a type of ethical and moral dilemma which must be engaged with if the firm seeks to continue to provide the good at both a profit as well as satisfying the ethical and moral considerations of need as related to demand within the given market. As can be seen from the preceding analysis, the level to which cost constraints dictate the manner in which the economics of the pharmaceutical market are displayed, very little freedom exists for the manufacturer to reduce price or redefine the way in which products are presented to the end consumer. However, if the governmental entities that ultimately have purview over the pharmaceutical sector wish to intervene as a way to ameliorate the level of high prices that are represented to the end consumer, it is foreseeable and likely that a level of subsidization of the research and development process could still see the pharmaceutical firms maintain a high level of profitability while at the same time not passing on the direct cost of research and development to the end consumer. Naturally, such an approach would mean that a level of taxation and dead-weight loss would be assumed; yet, this is an issue that must be engaged upon if it is the ultimate desire of the society to seek to present a more fair and equitable access to the end product by the consumer. References Beach, R 2012, Microcap Pharmaceutical Firms: Linking Drug Pipelines to Market Value, Journal Of Health Care Finance, 39, 2, pp. 82-92, Business Source Premier, EBSCOhost, viewed 19 February 2013. Gupta, U, Bhatia, S, Garg, A, Sharma, A, & Choudhary, V 2011, Phase 0 clinical trials in oncology new drug development, Perspectives In Clinical Research, 2, 1, pp. 13-22, Academic Search Complete, EBSCOhost, viewed 19 February 2013. Jin-Jian, L, Wei, P, Yuan-Jia, H, & Yi-Tao, W 2012, Multi-Target Drugs: The Trend of Drug Research and Development, Plos ONE, 7, 6, pp. 1-6, Academic Search Complete, EBSCOhost, viewed 19 February 2013. Malinowski, M, & Gautreauxt, G 2012, All that is Gold Does Not Glitter in Human Clinical Research: A Law-Policy Proposal to Brighten the Global "Gold Standard" for Drug Research and Development, Cornell International Law Journal, 45, 1, pp. 185-204, Academic Search Complete, EBSCOhost, viewed 19 February 2013. Stiglitz, J, & Jayadev, A 2010, Medicine for tomorrow: Some alternative proposals to promote socially beneficial research and development in pharmaceuticals, Journal Of Generic Medicines, 7, 3, pp. 217-226, Academic Search Complete, EBSCOhost, viewed 19 February 2013. Read More