In 2009 the first priority review voucher was awarded to Novartis in return for approval of Coartem, a treatment for a neglected tropical disease. Novartis can use the voucher for priority review at the U.S. Food & Drug Administration (FDA) for a drug chosen by Novartis.
How much is the priority review voucher worth? In a 2009 paper, my colleagues and I estimated that the voucher could be worth several hundred million dollars. The value derives from three factors: shifting sales earlier, longer effective patent life due to earlier entry, and competitive benefits from earlier entry relative to rivals. In addition to the voucher value, the developer of the treatment is eligible for orphan drug tax credits equal to half of development costs.
Value by Class
In September 2009, Waseem Noor of IMS Health showed that the voucher value varies by therapeutic area, because FDA review times vary by therapeutic area. Noor analyzed approvals between 2002 and 2007. For treatments for the nervous system, the median difference between priority and standard review is about 9 months (3 quarters) whereas for respiratory system the median difference is zero. Likewise, the value of applying a voucher to a blockbuster treatment for the nervous system could be $120 million, whereas the voucher might have negligible value if applied to a treatment for the respiratory system.
Noor's estimates account for several sources of uncertainty, including whether the product will be a blockbuster and whether the product will receive priority review without a voucher (because of the product's own novelty). For example, he estimates that the value of a voucher for type 2 diabetes medication Januvia (Sitagliptin) would be $162 million if the alternative were standard review. There is, however, an estimated 23% probability for priority review in Januvia's therapeutic class, so he estimates that the voucher value would be $125 million if applied to Januvia ex ante. This assumes that the value of the voucher is zero if the product receives priority review on its own merits. The voucher will have some value, however, if it can be transferred to a different product.
Value to Society
In the original paper where we proposed the priority review voucher, my colleagues and I focused on the value to the voucher holder, but the voucher potentially creates much more value to society if it motivates new cures for neglected diseases, and if consumers in the United States value earlier access to drugs beyond the price they pay. We estimate that the additional value to consumers of earlier access is half the value of the voucher. Hence, if the voucher is worth $100 million, then the consumer surplus is $50 million from faster review. The value of the new cure for a neglected disease could be many times greater, given that, for example, tens of millions of disability adjusted life years are lost each year to malaria.
- David Ridley is an Assistant Professor at Duke University. David, with Henry Grabowski and Jeffrey Moe, proposed the priority review voucher in a 2006 paper.
To read more:
• Henry G. Grabowski, David B. Ridley, and Jeffrey L. Moe. "Priority Review Vouchers to Encourage Innovation for Neglected Diseases.” In: K. Eggleston, ed. Prescribing Cultures and Pharmaceutical Policy in the Asia-Pacific. Brookings Institution Press. 2009.
http://faculty.fuqua.duke.edu/~dbr1/research/priority.pdf
• Waseem Noor. "Placing Value on FDA's Priority Review Vouchers." In Vivo. September 2009.
http://www.imscorprep.com/tl_programs/documents/IMS0909iv.pdf
• David B. Ridley, Henry G. Grabowski, and Jeffrey L. Moe. "Developing Drugs for Developing Countries." Health Affairs. 2006. Vol. 25, No. 2: 313-24.
http://content.healthaffairs.org/cgi/content/abstract/25/2/313
• BVGH Priority Review Voucher Web site: prvinfo.org