Costs of New Pharmaceutical Development Approaching US $3 Billion

The Tufts Center for the Study of Drug Development (“Tufts Center”) has recently published a study estimating the cost of new pharmaceutical development approaching US $3 billion.  The Tufts Center at Tufts University "provides strategic information to help drug developers, regulators, and policy makers improve the quality and efficiency of pharmaceutical development, review, and utilization."  The Tufts Center notes that:

The $2.558 billion figure per approved compound is based on estimated average out-of-pocket costs of $1.395 billion and time costs (expected returns that investors forego while a drug is in development) of $1.163 billion.

When post-approval R&D costs of $312 million are included, the full, product lifecycle cost per approved drug, on average, rises to $2.870 billion, according to Tufts CSDD. Post-approval studies, required by the U.S. Food and Drug Administration as a condition of approval, assess new indications, new formulations, and new dosage strengths and regimens, and monitor safety and long-term side effects in patients. All figures are expressed in 2013 dollars.

The Tufts CSDD estimate also accounts for expenses incurred for product development efforts that did not reach fruition, which Joseph A. DiMasi, director of economic analysis at Tufts CSDD and principal investigator for the study, said reflects the full cost of winning marketing approval for a new drug.

The press release concerning the study attributes the rising costs of drug development, in part, on the “higher failure rates for drugs tested in human subjects.”