News | November 15, 2006

Average Cost To Develop A New Biotechnology Product Is $1.2 Billion, According To The Tufts Center For The Study Of Drug Development

Boston - The Tufts Center for the Study of Drug Development today announced it has developed the first comprehensive estimate of the average cost of developing a new biotechnology product, and pegged it at $1.2 billion.

Tufts CSDD said the $1.2 billion estimate reflects the costs of drugs that fail in testing and the time costs associated with bringing a new biopharmaceutical to market. Of this amount, capitalized out-of-pocket preclinical cost totaled $615 million, while similar clinical period cost totaled $626 million.

A new biotech product took 97.7 months on average to wend its way through clinical development and regulatory review, about eight percent longer than for pharmaceuticals, according to the Tufts CSDD analysis.

"While biotech offers significant promise in treating entire categories of diseases for which no medicines previously existed, it comes at a significant cost," said Tufts CSDD Director of Economic Analysis Joseph A. DiMasi.

The Tufts CSDD findings were reported in the November/December Tufts CSDD Impact Report. The full study will be published in the journal, Managerial and Decision Economics.

To develop the estimates, Tufts CSDD relied on compound-specific costs for a sample of 17 investigational biopharmaceuticals from four firms that first entered clinical testing from 1990 to 2003. Average development times and phase transition probabilities were estimated based on data from more than 500 therapeutic recombinant proteins and mAbs. The full R&D cost estimate was based on a clinical approval success rate (defined as obtaining U.S. regulatory approval for marketing) of 30.2% for biopharmaceuticals.

The Tufts CSDD analysis also found that:

  • Average out-of-pocket cost (cash outlays) per approved biopharmaceutical for the preclinical period totaled $198 million. When capitalized, this estimate is $615 million per biopharmaceutical.
  • Average out-of-pocket clinical period cost per approved biopharmaceutical was $361 million. When capitalized, this estimate is $626 million.
  • Capitalization increases biopharmaceutical costs relative to traditional pharmaceutical costs because of a longer development timeline and a higher cost of capital.
  • Biopharmaceuticals had an overall clinical approval success rate of 30.2% vs. 21.5% for traditional pharma firm pipelines.

SOURCE: The Tufts Center for the Study of Drug Development