Indian Compulsory Licensing Case May Reveal Research Costs

During the Superbowl, Amy O'Connor published a post on the Eli Lilly official company blog which has stimulated discussion of the research and development costs of a new drug. Her dollar amount was $1.3 billion, based on the methodology of the Tufts Center for Drug Development. In response Matthew Herper of Forbes published an estimate ranging from $3.7-11.8 billion. Merrill Goozner critiques the methodology that produced both these estimates in a blog post on GoozNews. At the other extreme of the range of estimates is the $43 million estimate from Light and Warburton in BioSocieties, rebutted by Derek Lowe in this post and a follow-up post on his blog, In the Pipeline.

Herper's estimated range has the advantage of being based on public information, but his approach is far too simplistic. Since Light and Warburton's article is behind a paywall, Timothy Noah's article in Slate is worth reading as long as you take account of Derek Lowe's criticisms. These high and low estimates revolve around the work done on the subject at Tufts. Their research is funded by various drug companies with the proviso that the dollar amounts of the costs they submit to the researchers remain confidential. Besides the required public information such as used in the Forbes' article, all drug companies are extremely protective of this information

So we arrive at an interesting situation which is developing in India. In my previous post, Compulsory Licensing of Proprietary Drugs, I referred to the public record of Natco's application for compulsory licensing of Bayer's proprietary drug Nexavar (sorafenib). LiveMint gives some history and the recent developments, which include the scheduled disclosure by Bayer of the research and development costs on which they base their price for the drug. Ed Silverman has an excellent post on what is required of drug companies who import brand name drugs to India. He links to articles in the Indian press that are also very worth reading. Compulsory licensing in India and elsewhere is based on the World Trade Organization's Declaration in the TRIPS [Trade-Related Aspects of Intellectual Property] Agreement and Public Health, commonly known as the Doha Declaration since it arose at the 4th Ministerial Conference in Doha, India. The Public Library of Science has published more background in a research article, Trends in Compulsory Licensing of Pharmaceuticals Since the Doha Declaration: A Database Analysis. Table 1 below is a summary from this article.