Forbes: It can cost more than $5 billion to bring a drug to market

More than 95% of experimental meds fail, research shows

Topics: Finance, Supply Chain, Pharmacy, Clinical Research, Service Lines

August 15, 2013

A recent analysis of nearly 100 pharmaceutical companies paints a stark picture of what it costs to develop a new drug: About $5 billion per new medication, according to Forbes' Matthew Herper.

For years, researchers have estimated that inventing and developing a drug cost about $1 billion or more. However, these estimates account only for the costs that related directly to a specific drug's approval.

To obtain a more precise estimate, Herper calculated the cost of 10 years of research and development (R&D) at major biotechnology and drug companies and divided it by the number of new drugs they launched during or around that time. 

He found that companies that launched just one drug this decade spent about $953 million to bring the average drug to market. However, for major pharmaceutical companies that have brought to market between eight and 13 medicines over the decade, the average cost per drug was nearly $6 billion.

Expert: Drug research costs is becoming 'unsustainable'

The University of California-San Francisco's Susan Desmond-Hellmann, former head of development at Genentech, called the costs "crazy," adding, "For sure it's not sustainable." She noted that "any businessperson would look at this and say, 'You can't make a business off this. This is not a good investment.' I say that knowing that this has been the engine of wonderful things."

According to Forbes, more than 95% of experimental medicines that are studied in humans fail to be both effective and safe. The numbers clearly show "how horrendous the failure rate is and how that causes the cost of success to be so much higher," says NIH Director Francis Collins.

In 2011, Collins started the National Center for Advancing Translational Sciences to remove barriers that prevent drugs from reaching patients. The center is currently looking into ways to "reengineer the pipeline so if failures happen, they happen very early and not in later stages where the costs are higher," Collins says (Herper [1], Forbes, 8/11; Herper [2], Forbes, 8/11).

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