How Much Does Drug Development Cost?

A new study has revealed that the average cost of bringing a new drug to the global marketplace is $1.3 billion. While that sounds like a significant sum, it’s less than half the figure that had been previously claimed by the pharmaceutical industry, leading to concerns that drug companies may be artificially inflating the costs of research and development in order to drive up prices for their products.

The study was a collaborative effort behind the London School of Hygiene and Tropical Medicine in the UK and the Katholieke Universiteit Leuven in Belgium, with Dr Olivier Wouters from the London School of Economics the lead author on the paper. It is one of the first of its kind to independently analyse data from the industry that has not been volunteered by pharmaceutical companies themselves, theoretically making it more impartial than previous research.

A pretty penny

To arrive at their findings, the researchers amassed data from 63 of the 335 newly approved drugs and biological agents in the USA between 2009 and 2018. By examining the financial reports of the companies in question, the team of scientists were able to ascertain that the median cost of developing a new drug was $985 million, while the average cost was $1.3 billion. That’s significantly lower than the figure of $2.8 billion which had been arrived at by previous studies.

The reasons behind the discrepancy could be due to the fact some drugs – especially those associated with the treatment of cancer – are more expensive to develop than others. However, advances in analytical proteomics technology may cause a rethink in oncological drug discovery methods, potentially leading to reduced costs in the future. Nonetheless, this selective submission of data may lead to some diseases being overrepresented in the previous body of research.

Getting bang for buck

The estimates found in previous research not only encompassed the expenses involved in bringing the successful drug to market, but also the sunken costs of other, failed candidates, as well as the outlay associated with drumming up investment. However, as our technological ability advances and automated workflows in drug discovery and toxicology become more commonplace, it’s reasonable to expect the price of drug development to fall in the long term.

In any case, the authors behind the study argued that drug companies should be more transparent when charging for their services. “While it’s essential that the pharmaceutical industry continues to find it profitable to develop new drugs that save or improve lives, this study calls into question whether the high price tags of some new drugs are reasonable,” explained Dr Wouters. “If drug companies want to keep claiming that these costs justify soaring prices, then they need to make their data available for public scrutiny.”