Market Barriers to the Development of Pharmacotherapies for the Treatment of Cocaine Abuse and Addiction: Final Report. Translating Market Barriers and Policy Options into Financial Parameters

09/12/1997

As described in this report, pharmaceutical companies' decisions to pursue new products is based largely on financial considerations inherent in risk-reward tradeoffs. Despite the great diversity of market barriers, most can be interpreted as having a direct effect on one or more financial parameters that are factored into these decisions. Similarly, most policy options that exist or that could be implemented can be interpreted as having a direct effect on these financial parameters.

The figures below portray likely relationships between the particular market barriers (Figure 15) and policy options (Figure 16) identified in the 1995 IOM report and six basic parameters relevant to decisions to pursue a new therapy: R&D costs, (time to) product launch, marketing and distribution costs, market size/penetration, price, and (duration of) market life. These relationships were used in part to develop the scenarios shown later in this report. In particular, these relationships were used to translate market barriers, and various means that might lower these barriers, into the financial parameters used to generate the quantitative indicators of PAR and NPV. (Note: the use in Figures 15 and 16 of the market barriers and policy options cited in the IOM report does not imply that this study confirms all of those market barriers and policy options.)

Figure 15: Effects of Market Barriers on Types of Financial Parameters: New Medications for Substance Abuse (barriers drawn from IOM report)

  R&D Costs Product Launch Marketing / Distribution Costs Marketing Size / Penetration Price Market Life
Discovery            
Limited number of researchers focusing on drug abuse X X        
Lack of well-characterized animal models of cocaine addiction X X        
Limited basic science knowledge of addiction, craving, and relapse X X        
File IND            
Clinical Studies            
DEA regulations X X        
Complications of concomitant illness and polydrug abuse X X        
Patient population perceived as difficult to study X X        
Efficacy outcomes difficult to define or measure X X        
Few clinical investigators X X        
File NDA            
Length of FDA approval process X X       X
Other Approval            
State rescheduling   X       X
Varied state / local approval processes   X       X
DEA review time   X       X
Marketing            
Varied state and local regulations     X      
Lack of traditional marketing to physicians     X      
Pricing clause in DHHS CRADAs*         X  
Small foreign market       X    
Treatment System            
Limited number of narcotic treatment programs       X    
Stigma of drug-abuse       X    
Bias by some treatment providers against pharmacologic treatments       X    
Varied state / local treatment regulations and financing mechanisms       X X  
Uncertain treatment financing       X X  

Market barriers derived from IOM (1995).

*No longer applicable.

Figure 16: Effects of Policy Options on Types of Financial Parameters: New Medications for Substance Abuse
  R&D Costs Product Launch Marketing/Distribution Costs Market Size/ Penetration Price Market Life
Improve funding for government medications development   x        
Designate and support national drug abuse research centers x x        
Establish / Enhance Leadership in Improving Relationship w/ Industry      
Expand Treatment Capabilities of States      
Provide more funding to increase treatment where there are waiting lists       x    
Shift funds from supply control programs to treatment programs     x x    
Treatment Financing      
Require all Substance Abuse Block Grant recipients to offer approved anti-addiction medications       x x  
Assure appropriate financing of new medications by state alcohol and drug agencies and their counterpart Medicaid agencies       x x  
Training and Education      
Increase government training budgets     x x    
Regulatory Policies (FDA)      
Make treatment-IND, parallel track, and accelerated approval available for anti-addiction medications   x       x
Regulatory Policies (DEA)      
Count DEA review time as part of regulatory process for purposes of patent term extension for controlled substances           x
Remove / reduce bureaucratic burden on clinical investigations involving controlled substances x x       x
States      
Begin scheduling process as soon as possible after submission of NDA           x
Work more closely with states to prepare path for new anti-addiction medications     x x    
Compile information about state regulatory processes and educate state regulators and pharmaceutical company representatives     x x    
Develop a series of specific actions encouraging states to reform their laws and regulations to facilitate availability of new anti-addiction medications that are controlled substances     x x   x
Draft (national) legislation requiring states to implement needed changes     x x   x
Market Obstacles and Creating Incentives      
Size of Market      
Grant orphan drug (or similar) status to FDA-approved anti-addiction medications whose potential market can reasonably be judged to meet the 200,000 patient criterion x         x
Drug Pricing and Intellectual Property Rights      
Remove or modify reasonable pricing clause for CRADAs         x  
Streamline CRADA process   x        
Societal Stigma      
"Need for national leadership in support of pharmacotherapy and continued emphasis on prevention and treatment. The sense of social stigma is most likely to diminish as a result of public education and broader acceptance of addiction as a treatable disease."     x x    
Need for Federal Leadership      
Executive order assigning a high priority to the development of medications for drug-abuse treatment (or some other explicit action) x x        
Options for Further Consideration      
Offer developers of the first few FDA-approved mediations, for three years after approval, a federal subsidy of a maximum of $50 million for purchase of the drug (e.g., via reimbursement of copayment portion of medications for patients with health insurance and the full cost of medications of patients without health insurance)       x    
Standing federal purchase orders for prearranged quantities at an adequate price for one or more new cocaine treatment medications to begin at FDA approval       x x  
* Policy options derived from IOM (1995).