New drugs cost US$2.6 billion to develop

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The cost of drug development, including the price of failure and the opportunity cost, has more than doubled in the past decade, shows a Tufts study.

The lowdown: A widely cited 2003 study estimated that new drugs cost on average around US$800 million (in 2000 dollars) to develop when you include the price of failures and a 'time cost', the expected returns that investors forgo while a drug is in development (Journal of Health Economics 22, 151–185; 2003). Adjusting for inflation alone, that should have translated into a cost of just over $1 billion in 2013. A new analysis by the same authors using similar methodology now instead puts the cost at $2.6 billion in 2013 dollars, up by 145%.

Joseph DiMasi, of the Tufts Center for the Study of Drug Development in Boston, Massachusetts, USA, and colleagues estimated drug development costs based on data provided by 10 drug companies for a randomly selected subset of 106 self-originated drugs that went into the clinic between 1995 and 2007. Of the included drugs, 87 were small-molecule chemical entities (three of which were synthetic peptides), 10 were monoclonal antibodies and 9 were recombinant proteins. The authors found that the average out-of-pocket contribution to the total cost was $1.4 billion, and that the time cost was $1.2 billion. As Nature Reviews Drug Discovery went to press, the failure rate estimates and the development- and review-timeline assumptions that were used to generate the cost data were not yet public.

DiMasi attributes the higher price tag largely to higher failure rates and to increasing out-of-pocket expenses, driven by factors such as increased clinical trial complexity, larger clinical trial sizes and the cost of collaborating with the medical sector.

The analysis also found that the average cost of post-approval studies was just over $300 million.

DiMasi and his colleagues have submitted the article for peer review and publication.

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Mullard, A. New drugs cost US$2.6 billion to develop. Nat Rev Drug Discov 13, 877 (2014). https://doi.org/10.1038/nrd4507

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