Biotech drugs cost$1.2 billion
Developing a biotech product today costs $1.2 billion, according to the first estimate for the category developed by the Tufts Center for the Study of Drug Development. Surprisingly, this is actually about 6% less than a parallel estimate of the development costs associated with pharmaceuticals. Roughly half of the biotech cost is directed at preclinical studies, whereas the remainder is devoted to clinical development. The Tufts' estimate takes into account the cost implications of failed candidates and time to market. On average, it took almost 98 months for a biotech candidate to clear regulatory hurdles; that's 8% longer than for pharmaceuticals. But about 30% of biotech candidates were ultimately approved, a substantially better rate than the 22% rate for pharmaceuticals. Long approval times are often cited as a culprit in R&D cost increases, but that may not be the only factor. “The usual answer given is that the regulatory burdens are getting higher,” notes Gary Pisano, a Harvard Business School professor and author of the book Science Business (see Book Review, p. 45), which takes a critical look at the business of biotech. “There's a piece of it that's regulatory. But also as companies have gotten into more complicated, newer areas you go down more blind alleys.” Pisano also argues that poorly structured research efforts may mean that organizational challenges drain resources as well. “Drug R&D has also probably gotten a lot less efficient,” he asserts. “It's balkanized; there are a bunch of organizations functioning inside a single company. And as firms create alliances you get more bifurcation and potentially increasing costs.” StL
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