Economic return of clinical trials performed under the pediatric exclusivity program

Abstract

Context: In 1997, Congress authorized the US Food and Drug Administration (FDA) to grant 6-month extensions of marketing rights through the Pediatric Exclusivity Program if industry sponsors complete FDA-requested pediatric trials. The program has been praised for creating incentives for studies in children and has been criticized as a "windfall" to the innovator drug industry. This critique has been a substantial part of congressional debate on the program, which is due to expire in 2007.

Objective: To quantify the economic return to industry for completing pediatric exclusivity trials.

Design and setting: A cohort study of programs conducted for pediatric exclusivity. Nine drugs that were granted pediatric exclusivity were selected. From the final study reports submitted to the FDA (2002-2004), key elements of the clinical trial design and study operations were obtained, and the cost of performing each study was estimated and converted into estimates of after-tax cash outflows. Three-year market sales were obtained and converted into estimates of after-tax cash inflows based on 6 months of additional market protection. Net economic return (cash inflows minus outflows) and net return-to-costs ratio (net economic return divided by cash outflows) for each product were then calculated.

Main outcome measures: Net economic return and net return-to-cost ratio.

Results: The indications studied reflect a broad representation of the program: asthma, tumors, attention-deficit/hyperactivity disorder, hypertension, depression/generalized anxiety disorder, diabetes mellitus, gastroesophageal reflux, bacterial infection, and bone mineralization. The distribution of net economic return for 6 months of exclusivity varied substantially among products (net economic return ranged from -$8.9 million to $507.9 million and net return-to-cost ratio ranged from -0.68 to 73.63).

Conclusions: The economic return for pediatric exclusivity is variable. As an incentive to complete much-needed clinical trials in children, pediatric exclusivity can generate lucrative returns or produce more modest returns on investment.

Figure 1

The change in net return to cost ratio associated with variations in contribution margin for each evaluated drug is shown. The Y-axis denotes the impact on the 6 month benefit ratio as a percentage of the total. The X-axis denotes the percent contribution margin.

Figure 2

The change in net return to cost ratio associated with variations in discount rate for each evaluated drug is shown. The Y-axis denotes the impact on the 6 month benefit ration as a percentage of the total. The X-axis denotes the percent discount rate.