Once upon a time, winning FDA approval for a drug was considered the gold standard. Now, of course, another, equally important hurdle exists – convincing payers to provide coverage. Toward that end, drugmakers are spending ever more on health economics and outcomes research. At the 50 largest drugmakers, for instance, spending levels average $7.5 million, with budgets growing nearly across the board.

How is this money being spent? In the US, for instance, economics and outcomes research is typically being used to support 10 brands, although the 20 largest drugmakers are supporting nearly 20 brands, according to a survey by Cutting Edge Information, a market research firm that queried 30 drug and device makers that operate in numerous countries. In the US, the average spending per brand was $493,000, while device makers spend $357,000.

In the US, budget changes among all companies compared with 2011 rose 42 percent, but among those who are clearly spending more, increases rose by 66 percent, on average. Small drugmakers report the largest increases at 79 percent. “Though recent years have been tough for the life sciences industry in the US, companies understand the necessity of funding the health economics and outcomes research team and purse strings have loosened,” Cutting Edge concludes.

Not surprisingly, more is spent during later development stages. In the US, the most a company is willing to spend during Phase I is $250,000, but this rises to more than $1.5 million by the time a drug is launched. However, drugmakers are willing to spend less than $150,000 on a product at each point in its lifecycle if there is a low probability of success. And no money may be spent if a drug may fall short of expectations.

Here are a few other nuggets: Overall, 29 percent of companies house their health economics and outcomes research team under medical affairs, as opposed to a separate unit overseeing pricing and reimbursement, compared with 10 percent two years ago. However, 59 percent of US companies have a dedicated budget for this function, although marketing and managed care departments also contribute significantly to funding.

Most companies have between 25 and 50 full-time employees working in this area, and roughly two-thirds are generally pharmacoeconomists. Every position within this department, by the way, receives compensation of at least $100,000, but often much higher. A department head at a larger drugmaker, for instance, may earn nearly $300,000 before bonuses.

In the US, 58 percent of drugmakers have vp’s leading health economic groups and the lowest ranking supervisor is a senior or executive director. The percentage is only 34 percent in Europe, though, where many countries have single-payer systems. Only 17 percent of companies in emerging markets have a vp, however, overseeing this function.

By Ed Silverman