Cost to Develop a Drug More Than Doubles to $2.56 Billion

Print 19 November 2014
Anna Edney, Bloomberg

It costs drugmakers $2.56 billion to bring a new medicine to market, on average, more than double the price of 11 years ago, according to a study released today.

The higher cost comes from clinical trials that are larger and more complex, as well as more drugs that fail in development, according to the researchers. While the Food and Drug Administration is sometimes blamed for driving up costs because of the time it takes to review new drugs, that wasn’t a factor, according to the study by the Tufts Center for the Study of Drug Development.

“Drug development remains a costly undertaking despite ongoing efforts across the full spectrum of pharmaceutical and biotech companies to rein in growing R&D costs,” Joseph DiMasi, director of economic analysis at the Boston-based center, said in a statement.

Drug and biotechnology companies have come under pressure from lawmakers and health insurance companies to justify the costs of of their products. It’s a long-running debate that’s been reignited with the introduction of treatments like Gilead Sciences Inc.’s hepatitis C pill, Harvoni, which costs $94,500 for a 12-week course. The new drugs are the product of breakthrough science -- and come with breakthrough price tags.

As of the Tufts Center’s last estimate, in 2003, it cost $1.04 billion in 2013 dollars to develop a new brand-name drug. About 40 percent of the center’s funding comes from drug companies, with the rest from research grants and educational course fees.

Industry Attack

The health insurance lobby has repeatedly attacked the drug industry’s prices. America’s Health Insurance Plans, the industry’s Washington-based trade group, sends out weekly, if not daily, e-mails slamming drugmakers for relying on development costs to back the high price of pharmaceuticals.

“It’s become increasingly clear that drug prices are no longer driven by development costs,” Brendan Buck, a spokesman for AHIP, said in a Nov. 17 e-mail. “They’re set by whatever the drugmakers think they can get away with.”

Drugmakers have fired back that drug treatments are often cheaper than surgery or hospital care patients can require without them, and point out that other health-care spending makes up a far bigger part of costs.

The Tufts Center for the Study of Drug Development based its finding on data from the experiences of 10 drug companies and 106 experimental products. Eighty-seven of the products were less complex chemical drugs; the rest were more complex biologic drugs that are manufactured from living organisms.

The costs of development don’t always end after a drug is approved. The FDA can require new studies to get more data on safety and effectiveness, or the drugmaker can conduct trials to expand use of the medicine. Those post-approval studies add $312 million to a drug’s cost, raising the development price tag to $2.87 billion, according to the study.

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