Willingness to pay for faster clinical trial approval

One important reason why accelerating clinical trials is a good idea is that we want people to get access to new medicines sooner. But another reason is that there is a robust literature that shows pharma companies do more R&D when it is more profitable to do so. Shorter clinical trials mean firms can make money off their drugs for a longer time before their patents expire, and all else equal, this should induce more research that leads to new drugs.

Just how much does faster approval increase profits? Priority Review vouchers provide one line of evidence on this question. Priority review vouchers allow the holder to get an expedited review of a drug, shortening approval time by about four months; they’re issued to induce organizations to develop certain qualifying drugs. Drug sponsors can sell these vouchers to each other, and the price a pharma company is willing to pay for a voucher gives a window into how valuable a four-month speedup in drug approval is. Writing for Nature Reviews: Drug Discovery, a recent short article by Ridley and Xu find the typical price firms are willing to pay for a review voucher was about $100mn between 2019 and 2024, but has climbed to about $200mn in recent years. For the drugs that obtained vouchers, they also look at sales data and attempt to model the value this speed up provided to the holder. The average value, in terms of increased sales from faster market entry, is a little over $500mn. But the returns are highly skewed: three drugs probably made more than $1bn in additional sales from accelerated approval, but several others earned less than $100mn. Even so, they estimate more than half of drugs with a voucher earned an additional $200mn from the voucher, double what the going price for a voucher over the last few years.