This study analyzed the market barriers to the development of drug therapies for substance abuse and addiction, and for cocaine use and addiction in particular. Using market analysis, quantitative modeling, case studies, and industry interviews the study concluded that the development of a new cocaine pharmacotherapy was not economically viable for the pharmaceutical industry under current market conditions. Three critical market barriers faced by the industry included the small and uncertain market for cocaine addiction and abuse drug therapy, a substance abuse treatment system that limits access to this market, and limited and uncertain payment. Public strategies to lower these barriers include government funding of a considerable portion of new drug development; expansion and enhancement of the substance abuse treatment systems; creation of a guaranteed market, such as through purchase orders for minimum volumes of a medication; and extended market exclusivity, which would tend to give the therapies an "orphan drug" status.
The purpose of this project was to analyze market barriers to the development of medications for substance abuse and addiction, with emphasis on cocaine abuse and addiction. Information was to be provided on the characteristics of the market for substance abuse pharmacotherapies, real and perceived market barriers, case studies of pharmaceutical companies that have developed and marketed substance abuse medications such as LAAM (levo-alpha-acetylmethadol hydrochloride) and naltrexone, and the industry's perception of the readiness of the science base for the development of substance abuse pharmacotherapies.
Pharmacotherapy offers a means for improving the treatment of drug addiction. However, only a handful of medications have been developed and approved by FDA for treatment of opiate addiction during the past 30 years. A 1995 report by the Institute of Medicine on the development of anti-opiate and anti-cocaine medications found a reluctance on the part of the pharmaceutical industry to enter the field of anti-addiction products because of considerable market disincentives. These included an inadequate science base on addiction and the prevention of relapse, uncertain treatment financing, lack of specialists for treatment of drug addiction, Federal and State regulations, market size, pricing issues, societal stigma, liability issues, and difficulties in conducting clinical research.
A market analysis was performed for a prospective cocaine medication from the perspective of a pharmaceutical company. Data were compiled on the prevalence/incidence of opiate and cocaine addiction, current rates of treatment, and existing patterns of service delivery/financing for drug treatment. A market analysis model was designed to determine the expected profitability of a particular product. This analysis incorporated development cost, product sales, manufacturing/distribution costs, and the product/sales life. Financial indicators such as product net present value and peak annual revenue of the product were computed. Quantitative modeling was done based on hypothetical scenarios of company decision-making.
Case studies were conducted for the selected pharmacotherapies of LAAM, naltrexone, clozapine, and Nicorette. Literature reviews involved direct search of computerized data bases on clinical trials, product development, and marketing. Five private firms were interviewed to explore and characterize their views on market barriers and the readiness of the science base in developing medications for substance abuse and addiction. A detailed discussion guide served as an interview protocol.
Market analysis indicated that a combination of factors minimizes the attractiveness of the cocaine abuse market to the pharmaceutical industry. These include a relatively modest potential market (2.1 million heavy users), a low proportion of users currently in treatment (250,000 enrollees on any given day), concerns about compliance in this population, and apparent market expectation of a low price point. Anticipated low market penetration is reinforced by a substance abuse treatment model that generally emphasizes psychosocial rather than medical intervention. The treatment system involves little or no physician time in the treatment of patients. High price sensitivity of treatment programs subject to annual government appropriations has contributed to the disappointing market experience of two substance abuse medications, LAAM and naltrexone. Because the average treatment cost is $9.00 per day for non-intensive patients, which would be consistent with the great majority of all cocaine abuse patients, a cocaine medication price at a daily dose of a few dollars would represent a significant proportionate cost increase.
Quantitative analysis of various scenarios of corporate decisionmaking and market conditions indicated that the prospects for developing a new medication for cocaine abuse and taking it through a full product development cycle do not appear favorable given a moderate wholesale price and the expected market penetration. Financial returns are not sufficient to justify the participation of larger pharmaceutical companies. Case studies of selected medications documented the significant market barriers to pharmacotherapies for substance abuse and addiction, and the important role played by favorable government interventions--FDA fast-track approval (LAAM, clozapine, and Nicorette), modified phase IV clinical trial requirements (ReVia), market exclusivity (orphan drug status or other market protection for all four drugs), and mandated Medicaid coverage (clozapine).
Three market barriers would have to be reduced or eliminated in order to make new drug development attractive to pharmaceutical companies. One barrier is the small and uncertain market for cocaine addiction and abuse medication, given patient compliance problems, limited access to patients, and non-physician treatment managers who oppose the use of drugs to treat substance abuse. A second barrier is that the substance abuse treatment system limits access to the market, partly through the "anti-medication" climate among publicly-funded treatment staff. The third barrier is limited and uncertain payment for pharmacotherapy, given that substance abuse services continue to be subsumed under mental health benefits of shrinking entitlement programs, and given that high price sensitivity/resistance may limit market size. Pharmaceutical company interviews also indicated disagreement about the readiness of the science base for cocaine pharmacotherapies.
Possible government actions to overcome market barriers and to improve opportunities for developing cocaine addiction medications would include funding of a considerable portion of new drug development, expansion and enhancement of the substance abuse treatment system, guaranteed markets or purchase orders for minimum volumes of a medication, and extended market exclusivity via orphan drug status.
Uses of Results
The study complements the findings of the Institute of Medicine's earlier report. It tests various market assumptions to confirm the lack of economic viability for the development of substance abuse treatment medications and the importance of government intervention to lower critical market barriers if development and availability of such medication is deemed a desirable public policy goal. The results provide public decisionmakers with valuable information to weigh the potential advantages and disad-vantages of alternative policy actions in this area.
AGENCY SPONSOR: Office of the Assistant Secretary for Planning and Evaluation, Office of Health Policy
FEDERAL CONTACT: Kevin Hennessy
PHONE NUMBER: (202) 690-7272
PIC ID: 6694
PERFORMER ORGANIZATION: The Lewin Group, Fairfax, VA