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The Cost of Drug Development



The Tufts Center for the Study of Drug Development designed the recent study of the costs of new drug research and development to capture only the costs incurred by industry, but typically R&D efforts in the private and public sectors are complements, not substitutes.
new england journal
n engl j med 372;20 may 14, 2015
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DOI: 10.1056/NEJMc1503146
The Cost of Drug Development
To the Editor: In his Perspective article in this
issue of the Journal, Avorn
comments on the
methods and policy implications of our most re-
cent study of the costs of new drug research and
development (R&D).
Avorn makes the valid and
important point that not all costs associated with
the discovery and development of new drugs are
borne by the private sector. Our study was de-
signed to capture only the costs incurred by in-
dustry. The full social cost would be the sum of
the private costs and government and nonprofit
funding for research that contributes to the dis-
covery and development of new drugs. The latter
element of social cost would be very difficult to
quantify adequately. Our sample selection crite-
ria do not exclude cases in which companies use
information obtained from research funded by
nonprofits or government to guide their own ac-
tivities. By and large, R&D efforts in the private
and public sectors are complements, not substi-
tutes. The Tufts Center for the Study of Drug De-
velopment recently issued a white paper detailing
the relative R&D contributions of the private and
public sectors for the same set of drugs men-
tioned in Avorn’s article.
These scientific and
development histories demonstrate the rich inter-
connectivity of all sectors in the drug-discovery
and drug-development ecosystem.
We would also like to address a few additional
discrete points made by Avorn. First, our meth-
ods are already fully known. We have provided a
methods backgrounder
and noted that the meth-
ods are the same as those used in our previous
studies. A full exposition of methods can be
found in our study published in 2003.
Second, our definition of “self-originated” is
perhaps broader than what is suggested. It in-
cludes compounds that originated in an acquired
Third, drug failures are key contributors to
development costs. Our estimate of the clinical-
approval success rate of 11.8% (as compared with
21.5% in our previous study) was based on pub-
licly available information (commercial pipeline
databases) for a broad set of companies regard-
ing investigational compounds that met survey-
inclusion criteria (nearly 1500 molecules). It is
consistent with results from other studies.
Finally, pharmaceutical companies are over-
whelmingly equity-financed. If the offering of debt
(corporate bonds) at low rates were a superior
form of financing for them, then company capi-
tal structures would ref lect that. Investors would
not fund the R&D activities of drug companies
at the bond rate levels indicated in Avorn’s article.
The discount rate that we use represents the
funding requirements that were actually experi-
enced, on average, by drug developers during the
period that is analyzed.
Joseph A. DiMasi, Ph.D.
Tufts Center for the Study of Drug Development
Boston, MA
Henry G. Grabowski, Ph.D.
Duke Universit y
Durham, NC
Ronald W. Hansen, Ph.D.
University of Rochester
Rochester, NY
Disclosure forms provided by the authors are available with
the full text of this letter at
1. Avorn J. The $2.6 billion pill — methodologic and policy
considerations. N Engl J Med 2015;372:1877-9.
2. DiMasi JA, Grabowski HG, Hansen RW. Innovation in the
pharmaceutical industry: new estimates of R&D costs. Boston:
Tufts Center for the Study of Drug Development, November 18,
2014 (
3. Chakravarthy R, Cotter K, DiMasi JA, Milne C-P, Wendel N.
Public and private sector contributions to the research and devel-
opment of the most transformational drugs of the last 25 years.
Boston: Tufts Center for the Study of Drug Development, January
2015 ( ).
4. How the Tufts Center for the Study of Drug Development
pegged the cost of a new drug at $2.6 billion. Boston: Tufts
Center for the Study of Drug Development, November 18, 2014
( ).
5. DiMasi JA, Hansen RW, Grabowski HG. The price of innova-
tion: new estimates of drug development costs. J Health Econ
DOI: 10.1056/NEJMc1504317
Correspondence Copyright © 2015 Massachusetts Medical Society.
The New England Journal of Medicine
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... Approximately 10 years and $2.6 billion are required to bring a drug to market [1], while nearly 90% of proposed drugs fail to acquire clinical approval [2,3]. Even after attaining clinical approval, adverse drug reactions/events (ADRs/ADEs) are prevalent. ...
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... Despite the rapidly rising number of registered clinical trials being performed around the world, 3 there are growing concerns about the length of time and increasing costs of performing late-phase RCTs. 4 While most latephase RCTs do reach a conclusion, only 30%-40% are able to demonstrate efficacy of an intervention, sometimes referred to as 'positive' trials. 5 6 We would caution against the use of use of terms such as 'positive' or 'negative' and highlight the growing literature suggesting against use of these terms to describe RCT findings. ...
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Background For medical conditions with numerous interventions worthy of investigation, there are many advantages of a multi-arm multi-stage (MAMS) platform trial approach. However, there is currently limited knowledge on uptake of the MAMS design, especially in the late-phase setting. We sought to examine uptake and characteristics of late-phase MAMS platform trials, to enable better planning for teams considering future use of this approach. Design We examined uptake of registered, late-phase MAMS platforms in the EU clinical trials register, Australian New Zealand Clinical Trials Registry, International Standard Randomised Controlled Trial Number registry, Pan African Clinical Trials Registry, WHO International Clinical Trial Registry Platform and databases: PubMed, Medline, Cochrane Library, Global Health Library and EMBASE. Searching was performed and review data frozen on 1 April 2021. MAMS platforms were defined as requiring two or more comparison arms, with two or more trial stages, with an interim analysis allowing for stopping of recruitment to arms and typically the ability to add new intervention arms. Results 62 late-phase clinical trials using an MAMS approach were included. Overall, the number of late-phase trials using the MAMS design has been increasing since 2001 and been accelerated by COVID-19. The majority of current MAMS platforms were either targeting infectious diseases (52%) or cancers (29%) and all identified trials were for treatment interventions. 89% (55/62) of MAMS platforms were evaluating medications, with 45% (28/62) of the MAMS platforms having at least one or more repurposed medication as a comparison arm. Conclusions Historically, late-phase trials have adhered to long-established standard (two-arm) designs. However, the number of late-phase MAMS platform trials is increasing, across a range of different disease areas. This study highlights the potential scope of MAMS platform trials and may assist research teams considering use of this approach in the late-phase randomised clinical trial setting. PROSPERO registration number CRD42019153910.
... Randomized clinical trials represent almost two-thirds of the approximately $2.6 billion needed to develop a new drug [6], it is a very long and expensive method for designing and validating new therapies and technologies with a very disturbing high failure rate [7]. Furthermore, real clinical trials may indicate a drug to be ineffective, however, it rarely indicates the reason behind this failure. ...
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Background: COVID-19 pandemic has dramatically engulfed the world causing catastrophic damage to human society. Several therapeutic and vaccines have been suggested for the disease in the past months, with over 150 clinical trials currently running or under process. Nevertheless, these trials are extremely expensive and require a long time, which presents the need for alternative cost-effective methods to tackle this urgent requirement for validated therapeutics and vaccines. Bearing this in mind, here we assess the use of in silico clinical trials as a significant development in the field of clinical research, which holds the possibility to reduce the time and cost needed for clinical trials on COVID-19 and other diseases. Methods: Using the PubMed database, we analyzed six relevant scientific articles regarding the possible application of in silico clinical trials in testing the therapeutic and investigational methods of managing different diseases. Results: Successful use of in silico trials was observed in many of the reviewed evidence. Conclusion: In silico clinical trials can be used in refining clinical trials for COVID-19 infection.
... The cost of discovering and developing a drug has since escalated from US$ 800 million in the year 2001 to the current estimated figure of US$ 3 billion. The cost for drug development includes the entirety of failure; thus the estimated cost is an average estimate for a new drug to be introduced into the clinic [17]. The declining rate in the numbers of new drugs approved per billion US$ spent on R&D is alarming. ...
Introduction The use of Artificial intelligence (AI) in drug discovery and development (DDD) has gained more traction in the past few years. Many scientific reviews have already been made available in this area. Thus, in this review, the authors have focused on the success stories of AI-driven drug candidates and scientometric analysis of the literature in this field. Area covered The authors explore the literature to compile the success stories of AI-driven drug candidates that are currently being assessed in clinical trials or which have investigational new drug (IND) status. The authors also provide the reader with their expert perspectives for the future developments and their opinions on the field. Expert opinion The partnerships between AI companies and the pharma industry are booming. The early signs of the impact of AI in DDD is encouraging and the pharma industry is hoping for breakthroughs. AI can be a promising technology to unveil the greatest successes, but it has yet to be proven as AI is still at the embryonic stage.
... Fourth, the estimates ignored that drug R&D activities receive a considerable amount of public funding [20,21,23,24,[26][27][28][29][30]. The authors from the Tufts group [32][33][34][35][36] have countered these criticisms, defending the representativeness of their samples, the use of opportunity costs, the reasons for focusing on selforiginated NMEs, and for their exclusion of public funding. However, they have not offered sufficient justification for the inaccessibility of their data. ...
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Background Debate over the viability of the current commercial research and development (R&D) model is ongoing. A controversial theme is the cost of bringing a new molecular entity (NME) to market.Objective Our aim was to evaluate the range and suitability of published R&D cost estimates as to the degree to which they represent the actual costs of industry.Methods We provided a systematic literature review based on articles found in the Pubmed, Embase and EconLit electronic databases, and in a previously published review. Articles published before March 2020 that estimated the total R&D costs were included (22 articles with 45 unique cost estimates). We included only literature in which the methods used to collect the information and to estimate the R&D costs were clearly described; therefore, three reports were excluded. We extracted average pre-launch R&D costs per NME and converted the values to 2019 US dollars (US$) using the gross domestic product (GDP) price deflator. We appraised the suitability of the R&D estimated costs by using a scoring system that captures three domains: (1) how success rates and development time used for cost estimation were obtained; (2) whether the study considered potential sources contributing to the variation in R&D costs; and (3) what the components of the cost estimation were.ResultsEstimates of total average capitalized pre-launch R&D costs varied widely, ranging from $161 million to $4.54 billion (2019 US$). Therapeutic area-specific estimates were highest for anticancer drugs (between $944 million and $4.54 billion). Our analysis identified a trend of increasing R&D costs per NME over time but did not reveal a relation between cost estimates and study ranking when the suitability scores were assessed. We found no evidence of an increase in suitability scores over time.Conclusion There is no universally correct answer regarding how much it costs, on average, to research and develop an NME. Future studies should explicitly address previously neglected variables, which likely explain some variability in estimates, and consider the trade-off between the transparency and public accessibility of data and their specificity. Use of our proposed suitability scoring system may assist in addressing such issues.
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Machine intelligence (MI), including machine learning and deep learning, have been regarded as promising methods to reduce the prohibitively high cost of drug development. However, a dilemma within MI has limited its wide application: machine learning models are easier to interpret but yield worse predictive performance than deep learning models. Therefore, we propose a pipeline called Class Imbalance Learning with Bayesian Optimization (CILBO) to improve the performance of machine learning models in drug discovery. To demonstrate the efficacy of the CILBO pipeline, we developed an example model to predict antibacterial candidates. Comparison of the antibacterial prediction performance between our model and a well-known deep learning model published by Stokes et al. suggests that our model can perform as well as the deep learning model in drug activity prediction. The CILBO pipeline we propose provides a simple, alternative approach to accelerate preliminary screenings and decrease the cost of drug discovery.
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Background Technical information regarding health-related advances is sometimes esoteric for the general public. News media, therefore, plays a key role in public health promotion via health information conveyance. In this study, we use China as a sample country and analyze the claims and frames in news coverage of health-related advances, with special focus on news coverage of the development and performance of newly developed or tested drugs. Methods A keyword search was performed to retrieve news articles from four representative news agencies in China. In total, 3029 news reports were retrieved, of which 128 were selected for further analysis. Results Four aspects of news coverage of drug development were identified: (1) the characteristics of new drugs covered, (2) the sources of information, (3) the accuracy of health information in newspapers, and (4) textual features of news coverage. Conclusions Our findings reveal that guidelines should be established to facilitate more systematic news reporting on health-related advances. Additionally, literacy among the general public and professionalism in health information conveyance should be promoted to negate the “illusion of knowing” about health-related advances.
Microphysiological systems describe the use of divergent technologies to recapitulate complex physiology in vitro convergently in a cruelty and animal free manner. The technologies aim towards enabling researchers from academia and industry to conduct more ethical and cost-effective research and development, preclinical and translational, and to advance related fields such as precision medicine. However, projected markets appear relatively small compared to related markets, where regulatory implementation and reluctant end-user adoption creates uncertainty for the emerging technologies with associated technological maturity. Regardless of this, companies surpassed and expanded successfully beyond the predicted five-year survival rate through strategic technology- and business development through collaboration and partnerships. A hallmark of the companies is a core competency or unique intellectual property coupled with securing early investment and interest from industry role-players, using divergent strategies to create a burden-of-proof to encourage early adopter participation for technologies showing fit-for-purpose application. In this paper we aim to provide insights for the researcher who wants to become involved in the microphysiological field as an entrepreneur, requiring a generalized information landscape with keywords and concepts to expand their knowledge base. An overview is provided for the technological considerations for laboratory-to-market product development, the current state of regulatory affairs and projected markets to provide a framework of reference to evaluate the randomly selected case study companies. Public information is used to provide company information regarding historical origin, funding, and technological strategies which secured funding as well as encouraged early adopter technology interests. Additional activities by the companies showcase that there is no single formulation for commercial survival five-years post-incorporation but a pattern, dictated by technology origin, to follow which for convergent or divergent opportunities in technology development and business strategies.
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Background: With available funding from the public sector decreasing while medical needs and scientific complexity increase, private-sector collaborations with academia and government have become increasingly key in furthering medical innovation. Nonetheless, some skeptics diminish the contribution of the private sector to the discovery and development of truly innovative drugs on the one hand, while on the other hand they assert that research and development (R&D) of new medicines could and should be exclusively within control (at least financially) of the government. This begs the question, How much government funding would be needed to replace industry new drug R&D spending? Methods: We address the respective roles of the private and public sectors in drug development by examining a diverse array of evidentiary materials on the history of 19 individual drugs, 6 drug classes, and 1 drug combination identified as the most transformative drugs in health care over the past 25 years by a survey of over 200 physicians. Results: Only 4 of the individual drugs appear to have been almost completely researched and developed by one sector. One sector or the other, however, did dominate particular phases of the R&D continuum. For example, 54% of basic science milestones were achieved predominantly by the public sector and 27% by the private sector. For discovery milestones, it was 15% by the public sector and 58% by the private sector. The private sector was also dominant in achieving the major milestones for both the production and drug development phases (81% and 73% of the drugs reviewed, respectively). For 19% to 27% of the case histories for the various categories, dominance of one sector versus the other could not be determined. On the question of replacing industry's spending on the R&D of medicines, we estimate quite conservatively that the amount that would have to be spent by government would be nearly double the budget of the National Institutes of Health just to maintain the flow of the most innovative drug approvals and would have to increase nearly 2.5 times that level to maintain the development of all new drugs. Conclusions: Our analysis indicates that industry's contributions to the R&D of innovative drugs go beyond development and marketing and include basic and applied science, discovery technologies, and manufacturing protocols, and that without private investment in the applied sciences there would be no return on public investment in basic science.
The research and development costs of 106 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug and biologics development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per approved new compound is $1,395 million (2013 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 10.5% yields a total pre-approval cost estimate of $2,588 million (2013 dollars). When compared to the results of the previous study in this series, total capitalized costs were shown to have increased at an annual rate of 8.5% above general price inflation. Adding an estimate of post-approval R&D costs increases the cost estimate to $2,870 million (2013 dollars).
An industry-supported center claims that it costs companies $2.6 billion to develop a new drug. But we need a broader-based and more transparent reckoning of research-and-development costs to inform discussions about fostering innovation and paying for medications.
The research and development costs of 68 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per new drug is 403 million US dollars (2000 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 11% yields a total pre-approval cost estimate of 802 million US dollars (2000 dollars). When compared to the results of an earlier study with a similar methodology, total capitalized costs were shown to have increased at an annual rate of 7.4% above general price inflation.
Tufts Center for the Study of Drug Development
  • Boston
Boston: Tufts Center for the Study of Drug Development, January 2015 (