Costs of developing new drugs soar

It now costs around $2.6 billion to develop and win marketing approval for a new prescription medicine, according to a new study, up from $800 million joust over a decade ago.

The study by Tufts Center for the Study of Drug Development updates a previous report from 2003.

The estimate is based on information provided by 10 pharmaceutical companies on 106 randomly selected drugs that were first tested in human subjects anywhere in the world from 1995 to 2007.

“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,” said Joseph A. DiMasi, director of economic analysis at Tufts CSDD and principal investigator for the study.

“Because the R&D process is marked by substantial technical risks, with expenditures incurred for many development projects that fail to result in a marketed product, our estimate links the costs of unsuccessful projects to those that are successful in obtaining marketing approval from regulatory authorities.”

The rise in drug development costs have been driven mainly by increases in out-of-pocket costs for individual drugs and higher failure rates for drugs tested in human subjects, DiMasi says.

Increased clinical trial complexity, larger clinical trial sizes, higher cost of inputs from the medical sector used for development, greater focus on targeting chronic and degenerative diseases, changes in protocol design to include efforts to gather health technology assessment information, and testing on comparator drugs to accommodate payer demands for comparative effectiveness data, have all contributed to the rising costs.

Forbes magazine last year put the cost even higher – at nearly $5 billion – giving a list of how much new drug development cost at each of 100 companies.

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