Journal Article

The Expected Net Present Value of Developing Weight Management Drugs in the Context of Drug Safety Litigation

Chawla, Anita, Deng, Edmund, Tuttle, Edward, Carls, Ginger

2015

Overview

Background Following withdrawals, failures, and significant litigation settlements, drug product launches in the anti-obesity category slowed despite a large and growing unmet need. Litigation concerns, a more risk-averse regulatory policy, and the difficulty of developing a product with a compelling risk-benefit profile in this category may have limited innovators’ expected return on investment and restricted investment in this therapeutic area. Objective The objective of the study was to estimate perceived manufacturer risk associated with product safety litigation and increased development costs vs. revenue expectations on anticipated return on investment and to determine which scenarios might change a manufacturer’s investment decision. Methods Expected net present value of a weight-management drug entering pre-clinical trials was calculated for a range of scenarios representing evolving expectations of development costs, revenue, and litigation risk over the past 25 years. These three factors were based on published estimates, historical data, and analogs from other therapeutic areas. Results The main driver in expected net present value calculations is expected revenue, particularly if one assumes that litigation risk and demand are positively correlated. Changes in development costs associated with increased regulatory concern with potential safety issues for the past 25 years likely did not impact investment decisions. Conclusions Regulatory policy and litigation risk both played a role in anti-obesity drug development; however, product revenue—reflecting efficacy at acceptable levels of safety—was by far the most important factor. To date, relatively modest sales associated with recent product introductions suggest that developing a product that is sufficiently efficacious with an acceptable level of safety continues to be the primary challenge in this market.

• Publisher: Springer International Publishing,Springer,Springer Nature B.V
• Subject: Analysis / Anti-Obesity Agents - adverse effects / Anti-Obesity Agents - economics / Body mass index / Clinical trials / Costs / Diabetes / Diet / Drug Approval - economics / Drug Approval - legislation & jurisprudence / Drug development / Drug Discovery - economics / Drug Discovery - legislation & jurisprudence / Drug withdrawal / Drugs / Economic aspects / FDA approval / Finance / Government Regulation / Health Administration / Health Economics / Hypotheses / Laws, regulations and rules / Litigation / Manufacturing costs / Medicine / Medicine & Public Health / Models, Economic / Net present value / Obesity / Original Research Article / Overweight / Patients / Pharmaceutical industry / Pharmacoeconomics and Health Outcomes / Prescription drugs / Probability / Product development / Product safety / Public Health / Quality of Life Research / Rate of return / Regulatory approval / Return on investment / Risk factors / Studies / United States / United States Food and Drug Administration / Weight control / Weight loss products / Weight reducing preparations