Average Drug Development Cost Now $2.6 Billion

Based on the latest study conducted by the Tufts University Center for the Study of Drug Development, the total cost of developing a drug is, on average, $2.6 billion.  That figure includes $1.4 billion in direct out of pocket costs for each successful drug (along with the costs of all the pipeline failures), plus time costs of $1.2 billion.  Total development costs have grown by more than 8% a year since 2003, the year of the last comprehensive study.

Bruce Booth has a nice discussion about the study assumptions, along with a downloadable development cost model that you can play with.  I also recommend reading the slide deck and backgrounder from Tufts.

While some critics of the drug industry scoff at these cost estimates, I’ll just point out that if you divide the aggregate annual R&D budgets of the top 20 Pharma companies ($81B in 2012)* by $2.6B you end up with about 31 new molecules per year, a number that is not that far off from the actual current productivity of the entire pharma/biotech industry (An average of about 33 approvals per year across 2011-2013).  That’s a very rough calculation, but it shows that the study isn’t that far off from reality**.

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* Source: contractpharma.com
** See also Bruce Booth’s article for much more detailed analysis of top down and bottom up cost estimates.

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This entry was posted in Fixing Big Pharma Research, Pharmaceutical Industry and tagged . Bookmark the permalink.

One Response to Average Drug Development Cost Now $2.6 Billion

  1. Pingback: Dwarfed by Big Pharma, Biotech by the numbers | MechanizedIntelligence

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