Cost of drug development may not be $1 billion after all 
Posted by Carlos on Mar 07, 2011

So how much does it actually cost to develop a drug?

For years the work perfumed by DiMasi et al has formed the cornerstone of the oft-quoted >$800 million drug development price tag. Indeed, for many years the PhRMA and others have been touting the $1 billion figure largely based on the work by DiMasi.

Now comes a fascinating study by Light and Warburton which attempts to “demythologize” the high costs of pharmaceutical research. The authors have a number of issues with the methodology behind the DiMasi approach. Indeed, they spend 10 out of the 17 pages of their paper poo-pooing the DiMasi approach, and it is definitely worth the read.

So what is a realistic R&D cost estimate? By adjusting for taxpayer subsidies and a much lower discount rate, Light and Warburton estimate a median cost of $180-231 million per approved, self-originated NCE. When in-licensed or existing molecule drugs are accounted for, the net cost per approval is much much lower.

So what is the answer? The authors take a pass on this question. Instead, they conclude that by using independent sources of data and different methodology, quite different conclusions can be reached. Thus, readers should pay close attention to sources of data and methodological approaches before accepting the conclusions at face value.

They end their paper with a rather scathing indictment:

Thus, the mythic costs of R&D are but one part of a larger, dysfunctional system that supports a wealthy, high-tech industry, gives us mostly new medicines with few or no advantaged (and serious adverse reactions that have become a leading cause of hospitalization and death), and then persuades doctors that we need these new medicines. It compromises science in the process, and consumes a growing proportion of our money…In the meantime, a new generation of Indian and Chinese executives see how vulnerable the dysfunctional Western practices are.


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