Journal Article

Assessing the Financial Benefits of Faster Development Times: The Case of Single-source Versus Multi-vendor Outsourced Biopharmaceutical Manufacturing

DiMasi, Joseph A., Smith, Zachary, Getz, Kenneth A.

2018

Overview

The extent to which new drug developers can benefit financially from shorter development times has implications for development efficiency and innovation incentives. We provided a real-world example of such gains by using recent estimates of drug development costs and returns. Time and fee data were obtained on 5 single-source manufacturing projects. Time and fees were modeled for these projects as if the drug substance and drug product processes had been contracted separately from 2 vendors. The multi-vendor model was taken as the base case, and financial impacts from single-source contracting were determined relative to the base case. The mean and median after-tax financial benefits of shorter development times from single-source contracting were $44.7 million and $34.9 million, respectively (2016 dollars). The after-tax increases in sponsor fees from single-source contracting were small in comparison (mean and median of $0.65 million and $0.25 million). For the data we examined, single-source contracting yielded substantial financial benefits over multi-source contracting, even after accounting for somewhat higher sponsor fees.

• Publisher: Elsevier Inc,Elsevier Limited
• Subject: biopharmaceutical net returns / biopharmaceutical R&D cost / Biopharmaceuticals / Commerce / contract manufacturing / Contract negotiations / Corporate sponsorship / Cost control / Cost reduction / Costs and Cost Analysis / Disclosure / Drug development / Drug Development - economics / drug development time / Drug Industry / Drugs / Efficiency / Fees & charges / Manufacturing / Marketing / Outsourced Services - economics / Pharmaceuticals / Phase transitions / R&D / Regulatory approval / Research & development / Success