Tufts Report Puts Cost Of R&D At $2.6B Per New Drug
It’s not a secret that developing a safe and effective drug is a long, arduous, and expensive process. A new study released this week estimates the approximate numbers. According to Tufts Center for the Study of Drug Development, the cost of developing a new drug from discovery to market is about $2.6 billion and is over a decade’s worth of work.
This figure is substantially higher than the one estimated by the Pharmaceutical Research and Manufacturers of America (PhRMA), which put the number at $1.3 billion in their 2013 report, along with the caveat that the figure might be much higher.
Tufts based their calculations on a sample of ten drug makers and 106 randomly selected drugs, which were all tested on humans between the years 1995 and 2007.
Joseph DiMasi, director of economic analysis at Tufts, credits the exorbitantly high figure with increases in out-of-pocket expenses (estimated $1.4 billion) and higher failure rates as compared to the previous study conducted ten years ago.
As technology and treatments advance, explain the reports, so do the costs. New advances in immunotherapy and the emerging biologics market require much larger and more complex clinical trials. Additionally, the entire industry’s focus on chronic and degenerative disease, which is still so largely misunderstood, lead to a lot of failed trials.
Interestingly, according to DiMasi, two factors not responsible for raising costs are longer development and approval waiting times.
PhRMA estimates that the pharmaceutical industry invests a grand total of $48.5 billion in research and development. Even so, of the 5,000 to 10,000 compounds entering the pipeline, only one receives FDA approval. Sixteen percent of medicines which reach clinical trials proceed to market.
Even when a drug receives an FDA approval, the R&D expenses are not over. Drug companies must monitor long-term safety, test for new indications, formulations or dosage strengths — a $2.8 million process, according to Tufts.
DiMisi concludes, “Drug development remains a costly undertaking despite ongoing efforts across the full spectrum of pharmaceutical and biotech companies to rein in growing R&D costs.”