Presentation explains the Drug Development Process in terms of time/costs from initial research to final manufacturing. It presents strategies for increasing profits/decreasing costs, shows the impact of generics and details how Information Technology fits into this equation. It uses research from DiMasi and Grabowski to identify drug costs and product revenue.

1. DRUG DEVELOPMENT
PROCESS
Bob Sturm
Director, IT Validation

2. Goals for Today
• To understand the Drug Development Process
• How long does it take?
• How much does it cost?
• Where does I.T. fit in?

3. Purpose of I.T. at any company
• What is the purpose of I.T. at any company?
• Why does I.T. exist?

4. Purpose of I.T. at any company
• As told to me by a manufacturing company CFO
– I.T. exists to increase profits or decrease costs
– After profits and costs, everything else is fluff

5. Purpose of I.T. at any company
• Told to me by a manufacturing company CFO
– I.T. exists to increase profits or decrease costs
– After profits and costs, everything else is fluff
• I added that following the law comes first
– FDA, CIA and SOX
• Then we have the profits and costs axiom

6. Service Level Agreement
I.T. Vision Statement
• The goal of the I.T. organization is to support
its customers to bring new patient treatments
to market by providing information
technology services that optimize business
processes to reduce time and cost associated
with product development.

7. Drug Development Process – 28,800 hits

8. Process vs. Creativity over Time
Time

9. Drug Development Cycle
Time to Market - 2003
Infotechgraphics.com/projects/drug-development-cycle/

10. Critical Path for Medical Product
Development and Approval per the
FDA
FDA, Challenge and Opportunity on the Critical Path to New Medical Products 2004, p. 4

11. Three Dimensions on the Critical Path -
FDA
FDA, Challenge and Opportunity on the Critical Path to New Medical Products 2004, p. 10

12. Drug Development Cycle
– FDA Interactions
FDA, Challenge and Opportunity on the Critical Path to New Medical Products 2004, p. 12

13. CDER New Drug Development and
Review Process
 See notes for additional explanation of this chart.

14. Clinical Trial Process
Ph 3 Costs Exceed $26,000 / patient-2006 (1)
1) prnewswire.com, Phase 3 Clinical Trial Costs; Ph 1: $15.7k/ patient, Ph2: $19.3k/patient, Ph3 $26k/patient
 See Definitions for an explanation of the Approval Process

15. Drug Development by the Numbers
(DiMasi et al, 2003, except where noted)
• Drug synthesis to FDA approval is about 12 years
• Drug Synthesis to IND is ~4.3 years
• IND submittal to NDA submittal is ~6 – 7 years
• NDA submittal to FDA approval is ~0.5 – 1.5 years
• Clinical phases 1, 2 and 3 are ~5.7 years (phases
overlap each other)
• Only 1 in 3 drugs cover their R&D costs (1)
• Roche stopped a Ph 3 study of 15,000 patients for
a cholesterol drug (2)
1) Grabowski et al, “Returns on R&D”, 2002, p. 27: 2) Pharmalot.com, August 2012

16. Total Drug Development Costs (1)
2011: New drug development costs are about $1.3 billion (2)
1) DiMasi et al 2003, p.167. Columnar years are 1979, 1991 and 2003
2) http://csdd.tufts.edu/news/complete_story/pr_outlook_2011/, Drug developers are aggressively changing the way they do R&D

17. Clinical Trials (Trail Duration and
Capitalized Expected Costs (1) / Approved Drug)
• Phase 1 (22 months / $30.5 million)
– Evaluate Safety
• Phase 2 (26 months / $29.5 million)
– Identify the correct dosing level
– Monitor safety
• Phase 3 (31 months / $37.4 million)
– Evaluate safety in a large population over time
– Evaluate effectiveness (Meets it’s end points?)
• Long Term Animal Studies (37 mo / $3.0 million)
• Phase 4
– Marketing studies
DiMasi et al, 2003, p. 165, Table 3
1) Includes out-of-pocket costs, inflation rates, cost of capital, attrition rates, see DiMasi pp 158 – 161;

18. Total Costs/Approved Drug
– the Math: C x P = E
• (Actual Capitalized Costs) X (Probability of
success) = Capitalized Expected Costs
• (Actual Capitalized Costs) X 21.5% (1) = $100.4
Mil
• Actual Capitalized Costs = $467 Million
• Preclinical Costs = Discovery + Preclinical
• Preclinical Costs = $335 Million
• Total Costs / Approved Drug = $802 Million
1) 21.5% - Source: DiMasi et al, 2003, p 165;

19. IND Filing to NDA Filing Time
(All NMEs Approved 1981 to 1989)
Differences due to process efficiencies and drug types

20. New Product Revenue – 2002
Approved drugs
Avg. of 118 NMEs introduced into the US market from 1990 - 1994

21. Generics Quickly Impact Sales Volume
• For 2010 within six months of a patent loss,
generics took more than 80% of sales volume
from the branded version (on average). (1)
• Plavix (BMS) went off patent in May 2012.
Within 2 months it’s sales dropped by 60%. (2)
• Avapro (BMS) went off patent in March 2012.
By July 2012 it’s U.S. sales dropped by 85%. (2)
• Singulair (Merck) went off patent in August
2012. Merck expect sales to drop by 90%. (3)
Fierce Pharma: 1) April 20, 2011; 2) July 25, 2012; 3) August 6, 2012

22. Impact of Generics

23. Increased Product Revenue

24. Strategies for Profits / Costs
• Fail fast, Win quick
• Focus on niche population instead of a block buster
– Genentech’s Heparin
• Adaptive trial design
– Modify the trial at specific points
• Reformulate and extend patent exclusivity
– Oxycontin – Perdue Pharma (1)
• Get an expert opinion to shorten the clinical trial
time
– KaroBio for their cholesterol drug (2)
1) Wall Street Journal - June 28, 2012 2) Business Week May 31, 2010

25. Drug Dev. Cycle - Application Systems
CCP4 Infomatica
MOE Business Intelligence
SLIM STAT CRM
Cellomics
cHCS Viewer WinNonlin Gov’t Pricing System/Medicaid
GeneGo MediData SAP
Rigaku Refrigeration Manager
Pipeline Pilot Calibration Manager
Symyx Compound Reg Chemstation /Chemlaunch/Chemstore
Symyx Isentris SAS
Lasergene eCTD Xpress/ ISI Toolbox
GCK Documentum / Ascent Capture
IDBS Activity Base Argus Drug Safety
Research Discovery Pre-clinical Clinical FDA Commercial

26. Where Does I.T. Fit In?
• Decrease Costs
– Cloud strategy
– SharePoint 2010
– FAST search
• Increase Profits
– Reduce time to product launch

27. Questions??

28. Definitions
BLA: Biologics License Application NDA: New Drug Application
CNS: Central Nervous System NME: New Molecular Entity
IND: Investigational New Drug R&D: Research & Development
FDA: Food and Drug Administration
NCE: New Chemical Entity
Approval process: Final review of process before patients are recruited. It includes
drug supply, randomization, FDA forms, signed patient consent forms , CRFs and Life
Sciences company and vendor project team readiness, etc.

29. References
• DiMasi, et al, 2003. The price of innovation: new estimates of
drug development costs. Journal of Health Economics 22, 151-
185.
• Grabowski, H.G., et al, 2002. Returns on research and
development for 1990s new drug introductions.
Pharmacoeconomics 20 (Supplement 3), 11-29.
• Food and Drug Administration, March 2004, Challenge and
Opportunity on the Critical Path to New Medical Products