Market Barriers to the Development of Pharmacotherapies for the Treatment of Cocaine Abuse and Addiction: Final Report. Scenarios of Company Decision Making


This report presents several scenarios of pharmaceutical company decision making regarding undertaking projects to develop pharmacotherapies for substance abuse (e.g., cocaine) under various sets of market conditions. Using a quantitative model developed by The Lewin Group, the market conditions are translated into financial and other parameters to generate estimated PAR and NPV for each scenario and for certain variations of these scenarios. Modeling these scenarios helps to illustrate some of the key barriers and other limitations to development of medications for cocaine abuse, as well as the extent to which certain types of financial and policy options might reduce such barriers. Policy options to lower barriers include some that already exist and some that have been posed by the IOM (1995).

The market conditions of each scenario are translated into parameters that are fed into the model to generate estimates of PAR and NPV. Four of the base scenarios have multiple variations, or sub-scenarios, to explore the sensitivity of the output measures to changes in selected parameters. The values assigned to most of the parameters for each base scenario are shown at the end of each scenario.

The five main scenarios are as follows.

Scenario 1: Big Pharm Cold Start. A large pharmaceutical company considers taking on a full product development cycle for a new medication. Sub-scenarios explore how changes in competition, pricing, and market penetration would affect PAR and NPV.

Scenario 2: Biotech Gets Help. A small biotechnology firm takes on the full product development cycle with a promising compound, given the expectation of a set of government incentives to pursue the product. Sub-scenarios explore the sensitivity of PAR and NPV to the various government incentives.

Scenario 3: Guaranteed Handoff. A pharmaceutical company considers accepting a government offer for the rights to a product that the government has taken into phase III clinical trials in the context of additional government incentives.

Scenario 4: Vaccine. A pharmaceutical company considers accepting a government offer for the rights to a product entailing a vaccine and annual booster that the government has taken through preclinical work, in the context of additional incentives provided by the government.

Scenario 5: Second Indication. A pharmaceutical company has a highly successful product that is already approved for an existing CNS indication. The product shows promise for treatment of cocaine addiction as a second indication. The company considers whether to pursue this second indication.

These scenarios are for discussion purposes only. They are illustrative, and not exhaustive, of the possible combinations of market conditions used here. The scenarios are entirely hypothetical works drafted by The Lewin Group. The scenarios do not represent any suggestion or intent by the government to adopt any policies described here. Certain policy options posed here are already in existence, e.g., orphan drug or similar status; others have been discussed in the 1995 IOM report cited in this document.