What is the value of redeeming a priority review voucher?
A new article was published recently by David Ridley and Chenxi Xu on the value of using and not using a priority review voucher. David Ridley was notably one of the authors of the 2006 paper that first proposed a Priority Review Voucher (PRV) program.
In this new publication, they estimate the value of a four-month quicker FDA approval. For novel drugs in which PRVs were used between 2009 and 2022, the median estimated value of priority review was about $212 million, and the mean was greater than $500 million. For drugs for which vouchers were not used, the median foregone value was greater than $400 million.
Their model indicated that the value of priority review is about 18% of expected peak annual net sales. So, paying approximately $200 million for a PRV could be justified for a product expected to generate more than $1 billion in annual net sales.
The article also comments on the evolving price for PRVs over time. The publication comments on the price fall from 2017 to 2024 and illustrates how this is consistent with an increase in voucher supply without a corresponding increase in demand. Since 2024, prices have risen from about $100 million to about $200 million even though voucher supply has not declined, which is thought to be reflective of stronger demand.
Do give the full publication from David Ridley and Chenxi Xu a read as its a very interesting piece of work and particularly the supplementary appendix which goes into more detail on their analysis and calculations.
Now this is where my (me/Lo/PRV Watch) own imagination and analysis comes in. I’ve long wondered what led to the spike in PRV prices in 2024, when a PRV was sold for $158 million despite more vouchers continuing to be issued. This was a significant jump from the $100 million-$110 million price range for which most vouchers had sold in the years prior.
Naturally, supply and demand drive the market value of these assets, but I have never been fond of using voucher issuances alone as a proxy for supply. This is the most robust data point to track, but it does not tell the whole story. The companies that these vouchers are awarded to vary in their tendency to sell. For example, if a voucher is awarded to Novartis, in theory that voucher is available for sale, but in reality, Novartis has no immediate need for the revenue it would get from selling the voucher and may find greater value in redeeming the voucher for one of its own assets.
I’ve long been planning to do an analysis like this, but this publication spurred me to do a crude assessment to see if there is any merit to this theory. I reviewed my own dataset of all the vouchers issued over time, up to 2025, as that is the most recent complete year. I then adjusted for the companies that, in my view, were unlikely to sell the voucher, meaning that the voucher was not available for sale. When I overlay this crude (very crude) analysis on top of PRV prices over time, I see an inverse trend.
When the number of PRVs available for sale is low, PRV prices are high and when PRV prices are low, the number of PRVs available for sale is higher. To my surprise, this trend is also critically displayed in 2024, where the surge in PRV price that I previously mentioned occurred at a time when available PRVs was declining. I would caution against any overinterpretation at this stage, but I see this as a signal that there is perhaps something to this theory. More to come when I have a bit more time to devote to this but hopefully this is of some intrigue to you as well.
