Modeling the Financials of a Drug to Treat Aging

We live in the world in which the regulatory costs imposed on the development of new medicine are enormous. This leads to centralization and regulatory capture. Only the largest entities, the Big Pharma companies, have the funds needed to satisfy the demands of regulators. These companies exist in synergy with the regulators, guiding the regulators (and the politicians backing them) to ensure that (a) their revenue streams are large and stable, and (b) there are fewer challenges to those revenue streams. Big Pharma entities are easily viewed through a cynical lens because their "treating the world, improving lives" rhetoric is far distant from their financial motivations as public companies, and their leadership has helped to produce a world in which medicine is more expensive and worse than would otherwise be the case.

But this is the view one has to adopt when developing a new medical technology with the intent of improving the human condition. A drug has to be truly amazing in order to reshape the system around it, and most do not reach that level. A drug that slows aging by a couple of years probably doesn't reach that threshold. One that modestly and rapidly reverses many age-related conditions may do so. We'll see! If a drug is merely a good, but cannot be shown to have a reasonable expectation of large profits, then it will never be widely used, as no Big Pharma entity will champion it though the vast expenses of regulatory approval, or during the subsequent machinations of adoption by physicians and payers. A drug can exist, but the complex and ugly systems of centralized healthcare can absolutely refuse to pay for it. Further, if a drug isn't patented, it will be ignored - there is no way to generate enough profit to justify championing it.

The post I'll point out today, from partners of a longevity-focused venture fund, builds a toy financial model as a refinement of the intuitive point that any drug capable of slowing or reversing aging will be enormously valuable, and therefore likely highly desirable to the pharmaceutical industry. One only has to look at the costs imposed by aging and age-related disease to see that. But one still has to build some form of model that takes account of the varied financial motivations of the regulators, Big Pharma, and the payers, and the way in which their decision makers look at drug value in order to be able to say, yes, it is likely to see adoption and use. The model here produces big numbers at the end of the exercise, which in one sense is expected.

The more interesting question is what it would take for the leadership of the various highly conservative organizations in pharma and medicine to believe that a new drug is actually worth that much, and act accordingly. Because these drugs already exist. Rapamycin to slow aging and the senolytic dasatinib and quercertin combination to reverse aging by clearing senescent cells are both backed by compelling animal data, and only lack similarly compelling human data. But one would think that based on (a) the compelling animal data and (b) models predicting enormous numbers for future drug profits, that someone would be attempting to commercialize, while being a great deal more aggressive in moving forward with that commercialization than is presently the case. New rapalogs and senolytics have their developers, but this part of the industry looks a lot like business as usual, and not a gold rush. So one might suspect that the powers that be in Big Pharma don't yet believe that this is real.

$200 Billion in Revenue: How an Aging Drug Will Conquer Pharma

An aging drug is a drug that has been rigorously shown to increase healthy lifespan in people, with emphasis on the ability of such an intervention to extend quality of life. It could allow older adults to enjoy a higher quality of life, for longer. The economics of delivering such value to human health at scale are unprecedented - we found that a drug approved and labeled for aging would conservatively have a peak global market size in the range of $150-$200 billion annually. This size is ~4x the peak projected annual revenue of GLP-1 receptor agonists at $50 billion by 2030, ~6x the peak projected revenue of America's soon-to-be best-selling drug, Keytruda (PD-1 cancer immunotherapy) at $30 billion annually by 2028, ~10x current bestseller Humira's peak annual revenue (anti-TNF) at $21.2 billion in 2022, and ~15x the peak annual revenue of enormous blockbuster Lipitor (a statin) at $13 billion in 2013.

It's also promising that the clinical trial to get this drug approved for aging and age-related disease on the label could potentially be as short as 3-6 years in length and cost $50-$100 million, within an order of magnitude of most Phase III clinical trials. Furthermore, just in the past month, we learned it was possible to get a drug approved and labeled for healthy lifespan extension in dogs by the FDA. In this piece, we walk through an estimate of the market potential of an aging drug.

To build a financial model for an aging drug, we need to answer: 1) How big is the market? 2) Who will pay for it? 3) What is the price of the drug? 4) What does adoption look like? The total addressable market (TAM) for an aging drug refers to the entire potential customer base that could generate revenue for the drug, encompassing all individuals who might benefit from or be interested in using it. We based our foundational TAM size on the total number of adults aged 65 or older in the US from the 2017 US census data. To know how much a drug is worth, we need to start with understanding who will pay for it. In the US, the majority of prescription medication costs are paid for by commercial health insurers and Medicare Part D. There is the potential for direct to consumer (DTC) brands to obtain a significant slice of this pie, however. If a drug designed to slow down the aging process receives FDA approval, it could initially pursue a DTC route, especially before long-term health outcomes and economics research can show financial benefits for insurers and other payers.

To predict the price of an aging drug, we estimated the monthly list price for a cash-pay model and the monthly net price for a reimbursement model. The list price is what the manufacturer sets for a drug before negotiations or discounts, which might reflect DTC market prices. In reality, a consumer pays something closer to the net price after discounts and rebates, determined via negotiations between pharma industry stakeholders. Currently, the reduction from the monthly list price ranges between 40-60%. What does adoption over time look like? For the maximum penetration rate (percentage of the TAM captured), we considered the following patient adherence numbers to approximate a range of 25% to 50%: half of all American adults get the flu vaccine every year; patient adherence to chronic medications is about 50%; patient adherence to cardiovascular medication (treatment dependent) ranges from 25-50%; in one study, of 400,000 people eligible to take statins, about 20% were chronically taking them. What is the adoption of an aging drug over time? Assuming a 25% penetration rate, the numbers range from 0.006% in 2030 to 25% in 2045. Assuming a 50% penetration rate the numbers range from 0.012% in 2030 to 50% in 2045.

The approval of a drug targeting the aging process could lead to a seismic shift in healthcare. The potential long-term healthcare savings are vast, as was with statins, which significantly reduced expenditure for inpatient care from hospitalization. With the potential to yield conservatively up to $200 billion annually, a company that owned only this drug would be more valuable than the top two big pharma companies (J&J and Pfizer) in terms of revenue... combined. We believe that this drug has the potential to become the largest product in human history.