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PharmacoEconomics

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01-07-2015 | Original Research Article

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

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

Published in: PharmacoEconomics | Issue 7/2015

Abstract

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.

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Title: The Expected Net Present Value of Developing Weight Management Drugs in the Context of Drug Safety Litigation
Authors: Anita Chawla
Ginger Carls
Edmund Deng
Edward Tuttle
Publication date: 01-07-2015
Publisher: Springer International Publishing
Published in: PharmacoEconomics / Issue 7/2015
Print ISSN: 1170-7690
Electronic ISSN: 1179-2027
DOI: https://doi.org/10.1007/s40273-015-0300-0

Keynote webinar | Spotlight on medication adherence

Springer Medicine

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

Abstract

Background

Objective

Methods

Results

Conclusions

Keynote webinar | Spotlight on medication adherence

Springer Medicine

Abstract

Background

Objective

Methods

Results

Conclusions

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