Cost
The full cost of bringing a new drug (i.e. a drug that is a new chemical entity) to market - from discovery through clinical trials to approval - is complex and controversial. One element of the complexity is that the much-publicized final numbers often do not include just the simple out-of-pocket expenses, but also include "capital costs", which are included to take into account the long time period (often at least ten years) during which the out-of-pocket costs are expended; additionally it is often not stated whether a given figure includes the capitalized cost or comprises only out-of-pocket expenses. Another element of complexity is that all estimates are based on confidential information owned by drug companies, released by them voluntarily. There is currently no way to validate these numbers. The numbers are controversial, as drug companies use them to justify the prices of their drugs and various advocates for lower drug prices have challenged them. The controversy is not only between "high" and "low" -- the numbers also vary greatly at the high end.
A study published by Steve Paul et al. in 2010 in Nature Reviews: Drug Discovery compares many of the studies, provides both capitalized and out-of-pocket costs for each, and lays out the assumptions each makes: see Supplemental Box 2. The authors offer their own estimate of the capitalized cost as being ~$1.8B, with out-of-pocket costs of ~$870M.
Studies published by diMasi et al. in 2003, report an average pre-tax, capitalized cost of approximately $800 million to bring one of the drugs from the study to market. Also, this $800 million dollar figure includes opportunity costs of $400 million. A study published in 2006 estimates that costs vary from around $500 million to $2 billion depending on the therapy or the developing firm. A study published in 2010 in the journal Health Economics, including an author from the US Federal Trade Commission, was critical of the methods used by diMasi et al. but came up with a higher estimate of ~$1.2 billion. Marcia Angell, M.D., a former editor of the New England Journal of Medicine, has called that number grossly inflated, and estimates that the total is closer to $100 million. A 2011 study also critical of the diMasi methods, puts average costs at $55 million.
Read more about this topic: Drug Development
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