Cost to develop a new drug reaches $802 million

February 1, 2002

Pharmaceutical Representative

The average cost to develop a new prescription drug has risen to $802 million, according to the Tufts Center for the Study of Drug Development.

The average cost to develop a new prescription drug has risen to $802 million, according to a study conducted by the Boston-based Tufts Center for the Study of Drug Development.

"Bringing new drugs to market has always been an expensive, high-risk proposition, and our latest analysis indicates that costs have continued to skyrocket," said Tufts Center Director Kenneth I. Kaitin. "The single largest challenge facing drug developers - both pharmaceutical and biotechnology companies - is to contain research and development costs and reduce development times without compromising clinical test design. It's a tall order."

Related Tufts Center research has found that it takes between 10 and 15 years to develop a new prescription medicine and win Food and Drug Administration approval to market it in the United States.

Reasons behind the cost increase

Had costs increased at the pace of inflation, the average cost of new drug development would have risen from $231 million in 1987 dollars to $318 million in 2000 dollars, according to Joseph A. DiMasi, director of economic analysis at the Tufts Center and the principal investigator for the latest study. Instead, the new study found that the average cost of new drug development had increased to $802 million in 2000 dollars. DiMasi attributes much of the increase in the total cost of new drug development beyond inflation to rising clinical trial costs.

"The difficulty in recruiting patients into clinical trials in an era when drug development programs are expanding and the increased focus on developing drugs to treat chronic and degenerative diseases have added significantly to clinical costs," said DiMasi. Included in the drug cost analysis are expenses of project failures and the impact that long development times have on investment costs. The estimate also accounts for out-of-pocket clinical costs, out-of-pocket discovery and pre-clinical development costs, clinical success and phase attrition rates, and the cost of capital.

New findings

Among the study's key findings:


•Â When compared with previous similar studies, the R&D cost per approved new drug increased by a factor of 2.5 times in inflation-adjusted terms.


•Â After adjusting for inflation, the out-of-pocket cost per approved new drug increased at a rate of 7.6% per year between the 1991 study and the current study. The annual rate of growth in capitalized cost between the two studies was 7.4% in inflation-adjusted terms.


•Â While costs increased for all R&D phases, the increases were particularly acute for the clinical period. The inflation-adjusted annual growth rate for capitalized clinical costs (11.8%) was more than five times greater than that for pre-clinical R&D.

The study was conducted using information obtained directly from research-based drug companies. PR

Related Content:

News