With say a 10-year life, this means that just to break-even you need profits of over $100m/yr by the time you present-value the profits. Of course these numbers are distorted by costs for potential chronic-use blockbusters - niche trials can be much cheaper.
Press Release
Source: Tufts Center for the Study of Drug Development
Total Cost to Develop a New Prescription Drug, Including Cost of Post-Approval Research, is $897 Million, According to Tufts Center for the Study of Drug Development
Tuesday May 13, 9:01 am ET
BOSTON--(BUSINESS WIRE)--May 13, 2003--The fully capitalized cost to develop a new drug, including studies conducted after receiving regulatory approval, averages $897 million, according to an analysis released today by the Tufts Center for the Study of Drug Development.
"Drug development remains a time-consuming, risky, and expensive process," said Tufts Center Director Kenneth I Kaitin. "To mitigate rapidly rising R&D costs, pharmaceutical firms over the past decade have aggressively sought to identify likely drug failures earlier in the development process. These efforts appear to be paying off, as the rate of late-phase terminations in the 1990s declined, compared to the 1980s."
Today's announcement expands on the $802 million estimate released by the Tufts Center in November 2001, by including post-approval R&D costs. The $802 million figure includes total average preclinical and clinical costs up to the time of receiving FDA marketing approval. Estimates are in year 2000 dollars.
Post-approval R&D costs are incurred by drug developers after receiving FDA approval to market a new product. Such costs may be incurred to conduct studies assessing the long-term safety and effectiveness of the marketed drug in a broader patient population or specific patient subgroups, such as children or the elderly, testing the marketed drug in new indications, and development of new formulations.
During the 1990s, clinical development times were a major source of the growth in drug development costs. From the 1980s to the 1990s, clinical period out-of-pocket costs grew five times as fast as preclinical period costs, according to the Tufts Center.
"Many factors are driving up clinical-period related costs," said the study's senior author, Dr. Joseph A. DiMasi, director of economic analysis at the Tufts Center. "Among them are a greater emphasis on developing treatments for conditions associated with chronic and degenerative diseases, increasing clinical trial sizes, rising subject recruitment costs, and more procedures performed per subject."
The Tufts Center study was based on an analysis of data covering 68 drugs from 10 multinational, foreign- and U.S.-owned pharmaceutical firms during the 1990s. Included were products that won or failed to win marketing approval, as well as products still in development.
Other key findings from the Tufts Center analysis:
Average out-of-pocket cost per approved drug for post-approval R&D is $140 million, but when capitalized to the point of marketing approval, using a discount rate of 11%, discounted out-of-pocket R&D costs are $95 million.
Average capitalized cost for post-approval R&D was 10.6% of the total capitalized cost.
While total average (preclinical plus clinical) costs increased 5.8 times in constant dollars between the 1970s and 1990s, clinical costs increased 8.6 times.
Only 21.5% of drugs that begin phase I human trials are eventually approved for marketing.
In 1991, the Tufts Center estimated that the average cost to develop a new drug was $231 million (in 1987 dollars), equivalent to $318 million in year 2000 dollars.
About the Tufts Center for the Study of Drug Development
Based in Boston, Mass., and affiliated with Tufts University, the Tufts Center for the Study of Drug Development (http://csdd.tufts.edu) 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 conducts a wide range of in-depth analyses on pharmaceutical issues and hosts symposia, workshops, and public forums on related topics.
Contact:
Tufts Center for the Study of Drug Development
Peg Hewitt, 617/636-2185
peg.hewitt@tufts.edu
or
Business Communication Strategies
Peter Lowy, 781/326-9980
lowy@bus-com.com |
