Prescription drug development costs skyrocket

December 2, 2014

The costs of developing new prescription drugs have soared 145% since 2003, according to a new study from the Tufts Center for the Study of Drug Development.

The costs of developing new prescription drugs have soared 145% since 2003, according to a new study from the Tufts Center for the Study of Drug Development (CSDD).

The cost of developing a new prescription medicine-a process that often lasts longer than a decade-was estimated at $2.6 million in 2013, based on average out-of-pocket costs of $1.4 million and average time costs of $1.2 million.

“Drug development remains a costly undertaking, despite ongoing efforts across the full spectrum of pharmaceutical and biotech companies to rein in growing R&D [research and development] 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.”

Tufts also found that the estimated average cost of post-approval R&D, which includes studies to test new indications, new formulations, new dosage strengths and regimens, and to monitor safety and long-term side effects in patients required, to be around $2.9 million for each approved new drug.

Rising 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, according to the study. “Factors that likely have boosted out-of-pocket clinical costs include 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,” according to a statement from Tufts.

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Lengthening development and approval times were not responsible for driving up development costs, according to the authors. “Changes in the overall time profile for development and regulatory approval phases had a modest moderating effect on the increase in R&D costs. As a result, the time cost share of total cost declined from approximately 50% in previous studies to 45% for this study,” DiMasi said.

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Tufts new analysis-the university conducted a similar study in 2003-was developed from information provided by 10 pharmaceutical companies on 106 randomly-selected drugs that were first tested in human subjects from 1995 to 2007.

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