Costs are escalating to conduct pediatric clinical trials--but companies so far remain undeterred by the hefty price tag. These findings could boost the drive to reauthorize two big pieces of federal legislation in October: the Best Pharmaceuticals for Children Act (BPCA), which provides incentives to test drugs already on the market, and the Pediatric Research Equity Act, which covers drugs still in development.

While the costs of conducting pediatric clinical trials has increased eight-fold--from $3.93 million in 2000 to $30.82 million last year--companies keep churning out the results. In 2000, just 58 pediatric trials had been conducted, but now there is cumulative data from 568 protocols.

The price jump reflects a number of factors, including a 178 percent increase in enrollment in each trial as well as more complex trials testing active ingredients in kid-friendly formulations like liquids and sprinkles.

"We were somewhat surprised," said Christopher-Paul Milne, associate director of the Tufts Center for Drug Development, which compiled the report. "Pretty much everything had increases in scope and complexity."

While most companies see at least  a modest returns on their investments, the individual bottom lines vary widely. A study earlier this year in the 

Journal of the American Medical Association

 looked at nine drugs--including five blockbusters--that had been granted pediatric exclusivity. The economic return, after clinical-trial costs were factored in, ranged from a loss of $8.9 million to a profit of $507.9 million.

Tufts also surveyed industry executives to determine what motivates companies to test their drugs in children. While financial incentives predictably played a role, 17 of the 19 respondents said they were conducting the trials to comply with BPCA, Milne noted.

Yet a report from CenterWatch found that Congress may cast a cold eye on reauthorizing the legislation due to the potential for "large windfalls" from the added six months of exclusivity granted to successful products, plus the delay in generic entry.

"The program is working," Tufts' Milne said. "They shouldn't tinker with the period of exclusivity."

Although it will always be more expensive to test a drug in pediatric populations, Milne expects the cost creep to level off over the next six years. Yet, he added, "the one thing that's sort of a wild card is competition for investigators and enrolling patients."

Articles

Costs of pediatric clinical trials are on the rise -- but companies forge ahead.

Pharma, Congress, and Kids

Medicare Part D has helped increase the number of pills in Americans' medicine cabinets, but more of those bottles than ever are old generics rather than new branded products. The hardest-hit categories were in primary care. Meanwhile, specialty products make up 40 percent of the market, but are driving 62 percent of the growth--up from 35 percent in 2000.

"For informed audiences, this is not new per se--it's a pretty fundamental dynamic," said Murray Aitken, senior vice president of corporate strategy at IMS Health, who described the "lower and slower uptake of innovative products" in classes such as proton pump inhibitors, antihistamines, and antidepressants.

A state of the industry report from IMS yesterday found that 31 new products were launched last year in a market that grew a flat 7 percent. New drugs introduced between 2001 and 2005 contributed just $13.5 billion of the $643 billion market.

The industry is apparently taking note. There are about twice as many oncology compounds in development than in the next largest category, central nervous system products, according to Aitken. There's a reason for it: The oncology market grew 20.5 percent to $34.6 billion last year, and is still primed for more growth.

Medicare Part D, meanwhile, is increasing the number of prescriptions being filled. While emerging markets like China and India continue to experience double-digit growth, the US is doing its part to fuel the market. Sales here grew 8.3 percent, compared to 5.4 percent last year. In comparison, sales in Europe slowed to 4.4 percent compared to 4.8 in 2005.

"2006 was an exceptional year because one of the largest payers worldwide decided to expand access," Aitken said, referring to the US government. "Medicare was a good thing for the pharmaceutical industry."

Aitken expects the honeymoon to last until at least 2009 before prescription drug plans begin to exert significantly more pressure on drug pricing.

Patent challenges will also cut into sales in markets such as cardiovascular, which grew 7.5 percent to $35.2 billion, the fattest in the report. For now, despite the inroads generic simvastatin has made into the revenue of Lipitor (atorvastatin), the class as a whole is gaining from increased volume and new interest in drugs like Crestor (rosuvastatin) and Vytorin (ezetimibe/simvastatin).

Other notable markets mentioned in the report were respiratory agents--which grew 10 percent to $24.6 billion--and autoimmune agents, which grew 20 percent to $10.6 billion.

Yet the industry is clearly bracing for turbulence ahead. The recent epidemic of restructuring by industry giants that has seen heads roll and shuttered manufacturing plants is "a sign of some pretty fundamental stress," Aitken said.

He also cautioned companies to slow down before rushing into new therapeutic areas like oncology that--on the surface, at least, and in the short term--offer the most growth potential. "There's still a herd mentality in this industry," he said. "It's not going to end well for every company."

No surprises here: Medicare, emerging markets boost drug sales--but mostly generics.

The State of Pharma--By the Stats

What will pharma's next big, splashy merger be? It's that time of year again, and rumors are flying fast and furious. Schering-Plough scored a coup by grabbing the first spotlight last week when it decided to take the plunge--opting for a quiet, dignified affair with a smaller company that has complementary strengths in primary care and animal health.

The New Jersey-based drug giant will purchase Organon, a unit of Dutch chemistry company Akzo Nobel, for $14.4 billion. Although best known for its non-oral contraceptives, NuvaRing and Implanon, Organon also has products in the fertility, anesthesia, and central nervous system therapeutic areas--three lucrative markets that Schering-Plough, a major player in allergy, cardiovascular, and anti-infective products, is eager to crash. Both companies have strengths in animal health.

Joseph Tooley, an analyst at A.G. Edwards, expects cardio products to remain Schering-Plough's top growth drivers. But he noted that the company's marketing prowess could help build out Organon's franchises. Moreover, Schering-Plough needs more products in late-stage clinical trials--which Organon has--if it wants to maintain its financial momentum while waiting for its own pipeline to mature. "The deal adds overall diversification--and has certainly filled in some holes in the Schering-Plough picture," Tooley said.

The acquisition gives Schering-Plough five drugs in Phase 3 as well as biologic and vaccine compounds. "In this consolidating industry, gaining scale is important," CEO Fred Hassan told analysts.

Yet one Phase 3 product with a question mark over it is asenapine, a schizophrenia drug that Pfizer gave the once-over before rejecting. Critics argue that asenapine offer no benefit over current therapies. But Tooley is in the more optimistic camp. "It's trial and error in that space," he said, referring to the fact that schizophrenia patients can have vastly different responses to seemingly identical drugs. "There's really not a lot of differentiation in that market."

Schering-Plough is projecting an attractive $500 million savings in cost synergies over the next three years through attrition and a reduction in selling and administrative expenses. Yet Hassan, a perennial dealmaker, pledged to maintain his sales-force headcount for at least one year--noting that too many mergers sour because executives emphasize cutting costs rather than generating revenue. "Most integrations do not capture the value they should," he said.

So, Big Pharma, who's next? All eyes are on Bristol-Myers Squibb to see if that company has those wedding-bell blues.

Merger with Organon strengthens late-stage pipeline.

Pharmaceutical Executive-03-21-2007

Pharma, Congress, and Kids

The State of Pharma--By the Stats

Schering-Plough Gets Hitched! Who Knew?