Market Barriers to the Development of Pharmacotherapies for the Treatment of Cocaine Abuse and Addiction: Final Report. Peak Annual Revenue


Figure 18 (below) shows expected peak annual revenue to a pharmaceutical company under the nine combinations of market penetration and wholesale price. Under the most optimistic combination of these, the PAR to the pharmaceutical company would be $455 million, well above most companies' acceptable PAR thresholds. However, achieving this PAR would require the following.

  • There would be 500,000 cocaine users (double the current 250,000) enrolled in treatment daily, representing about 20 to 25 percent of the estimated total number of heavy cocaine users.
  • Payers would be willing to pay roughly $2.75 to $5.00 retail for medication per day per enrolled user.
  • Approximately $500 to 600 million of funding for treatment with the new drug (i.e., the retail payments for $455 million wholesale of the drug). This would have to be realized in the form of new funding, reallocation of funds from the $2.1 billion currently spent for treating the 250,000 patients currently enrolled in treatment, or a combination of these.

Achieving these assumptions would likely require creation and funding of a new national substance abuse treatment program for cocaine users. Precedent for such new funding exists in the creation of the national methadone maintenance treatment system in the early 1970s, when nearly 100,000 methadone treatment slots were funded de novo. This was equivalent to 20 to 25 percent of the estimated number of heroin addicts at that time (also the current penetration of methadone treatment). This major funding initiative was supported primarily by the federal government and entailed, as planned, a phase-down of federal dollars over the subsequent five years.

Figure 18: Peak Annual Revenue under Alternate Assumptions for Number of Daily Patients and Price of Medication
Wholesale Price of Medication ($/day)
Market Scenario
Daily Patients in 000s
Expected Peak Annual Revenue to Pharmaceutical Co. ($ millions)
$455.0  $227.5  $91.0 
$227.5  $113.8  $45.5 
Half entry
$113.8  $56.9  $22.8 

A PAR of $227.5 million could be achieved through: 1) the doubling of current market penetration of cocaine treatment (likely requiring a national cocaine maintenance system) with the middle-tier price or 2) current treatment levels with the higher price. Another way to realize this estimate would be if two-thirds of current daily patients and about one-third of the recent departures from treatment took the medication. Under this scenario, patients would take the medication for an average of three months during treatment, and half might continue for another three months. (These average times for taking medication are illustrative only. Such determinations would necessarily reflect such factors as whether a drug is intended for short-term use, e.g., for detoxification, or indefinite maintenance, as well as patient drop-out rates, which can be considerable.) As noted above, achieving this estimate would require a major infusion or diversion of resources, equal to about 15 percent of current funding for treatment of cocaine abusers.

A PAR of $100 million per year could be achieved under more moderate, though still ambitious, scenarios. Market penetration of 50 percent would require a wholesale price of $2.50 per day to generate this level of revenue. If a new medication reached the current number of daily enrollees, the price can be about half as high, i.e., $1.25 wholesale. Doubling the current number of treated patients would yield $91 million per year at a retail price of only $0.50 per day.

The time to achieve PAR reflects the level of investment in a new drug, and affects the number of years during which peak annual revenues can be sustained, i.e., before a product loses its market exclusivity. This is addressed in the sample scenarios later in this report.