The Costs of Developing a New Marketable Drug - REVISED

Some estimates put the time and money costs of developing a new marketable drug in the United States as much as $2.6 billion and taking up to 15 years. Why so expensive? It costs a lot of money and takes a lot of time to create, properly understand, and develop a drug. Drug discovery takes years while employing state of the art technologies in scientific instrumentation, robotics, computing, abundant resources and numerous, highly educated professionals. The process is long, technical and arduous, and candidates continually fail, and fall to the wayside. The discovery process can start with millions of candidates, and each step in the process filters out or eliminates the vast majority. The end results are a very limited number of compounds entering development (1:1000 to 1:1000000) for human clinical trials. Developing the drug through clinical trials is the most expensive part of the process, also filtering out many failing compounds along the way. It is incredibly expensive to run clinical trials, and the larger and more complex the trial, the more expensive. The average time for all three phases of clinical trials is 6-7 years. Physicians, nurses, technicians, laboratories, drug manufacturing/supply chains, statisticians and a host of other expenses can add up quickly. Each patient enrolled needs regular clinic visits for drug administration, examinations, procedures and tests. All needed to gather critical trial data and monitor the patient for drug efficacy and adverse events. Depending on the trial, some of the procedures could be complex, expensive (e.g. CT scans), and be required regularly throughout the trial’s duration.

Upon bringing a drug to market there are a great many obstacles to generating a profit. First, the duration of patent may be reduced due to numerous possibly delays with data analysis, FDA approval and the clinical trials themselves; shortening the time between first sales and generic competition. And more drugs are facing direct, novel competition as soon as entering the market, occurring at a steadily increasing rate year over year. The average time from entering the market to novel competition within a therapeutic class is 1.2 years.

It is estimated around 90% of all new drugs are developed by private industry. (PhRMA, 2016 ). When you look at the lack of innovation in drug development throughout the rest of the world, especially in countries with fully socialized pharmaceutical price controls, and see the costs associated with drug development in the United States, it becomes clear: having an open and free market, free of price controls, and coupled with baseline pubic research and grants (FDA and NIH) is the only way to fund such endeavors. Profitable corporations are the only entities capable of such a monumental task, as taking a drug from target to market, and able to generate such vigorous competition in the process.

Hughes J.P., Rees S., Kalindjian S.B., Philpott K.L. (2011). Principles of Drug Discovery. Br J Pharmacol. 2011 Mar;162(6):1239-49. doi: 10.1111/j.1476-5381.2010.01127.x

New Medicines. New Hope. - JA Online. (n.d.). Retrieved October 24, 2016, from http://www.ja-online.com/industry/Module2Cost_of_Prescription_Drugs.pdf

PhRMA | Chart Packs. (n.d.). Retrieved October 24, 2016, from http://chartpack.phrma.org/biophrma-chartpack/research-and-development/the-biopharmaceutical-research-and-development-process

Dimasi, J. A., Hansen, R. W., & Grabowski, H. G. (2003). The price of innovation: New estimates of drug development costs. Journal of Health Economics, 22(2), 151-185. doi:10.1016/s0167-6296(02)00126-1