Rethinking Healthcare

The drug development discord: does it cost less than we think?

Posting in Science

A recent paper flamed tons of debate by saying it costs around $40 million to develop a new drug, or about a billion dollars less than what the reigning estimate is. Industry disagrees. Here's what's happening.

About a month ago, a paper published in BioSocieties sought to demythologize the high costs of pharmaceutical research. In particular, a widely-cited 2003 study estimated that it takes $802 million to bring a new drug to market.

The authors of the new paper, however, argue that research and development costs are actually only $43 million per new drug.

The industry disagrees. A Slate piece agrees. Pharma commenters are saying that if enough people believe something idiotic, those beliefs can have consequences. The discussion rages.

On the $802 million figure from the 2003 study from Tufts University:

  • R&D costs of 68 new drugs were obtained from a survey of 10 participating drug companies.
  • The average out-of-pocket cost to bring every new drug to market is $802 million (that’s year 2000 dollars).
  • This has been updated by 64% to $1.32 billion in 2006.

Challenging that study, some rhetoric and conclusions by Donald Light and Rebecca Warburton from the recent paper in the London School of Economics journal BioSocieties:

  • R&D costs companies a median of $43.4 million per new drug; company supported analysts conclude they are over 18 times larger, or $802 million.
  • The high prices of new medicines, the discounts offered to poorer countries and the new, overpriced policy tools are built on the mythic costs of R&D and their mythic promise to save millions more lives than they can.
  • The self-perpetuating high-cost myth also produces wasteful and inefficient corporate research structures and compromises science.
  • 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 advantages (and serious adverse reactions that have become a leading cause of hospitalization and death), and then persuades doctors that we need these new medicines.

According to a highly-commented article in Slate, the authors “correct for all these flaws” in the Tufts study: "So the drug companies' $1.32 billion estimate was off, according to Light and Warburton, by only $1.265 billion. Let's call it a rounding error."

Some rebuttals:

1. From Tufts Center for the Study of Drug Development:

In short, every one of Light and Warbuton’s adjustments are invalid. Furthermore, two peer-reviewed papers by current and former FTC economists, also not cited by Light and Warburton, validate our work using other methods and public data. They find that R&D costs are likely as high or higher than our estimates.

2. In the Pipeline has been following this extensively. Some extracted bits:

Fine, then – I'm in agreement, on general principles, with Light and Warburton when they say that the Tufts study estimates are hard to check and likely too high. But here's where we part company. Not content to make this point, the authors turn around and attempt to replace one shaky number with another. The latter part of their paper, to me, is one one attempt after another to push their own estimate of drug R&D costs into a world of fantasy. Their claim is that the median R&D cost for a new drug is about $43 million. This figure is wrong.

And this: "This is a viewpoint that can only be held by someone who has never tried to discover a drug, or never held a serious conversation with anyone who has."

3. For some more estimates (and maybe make some of your own), try this site: “Choose your Own Numbers: Crowdsourcing the Cost-to-Produce a new Drug?”

Image by Michael Flick via Flickr

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Janet Fang

Contributing Editor

Janet Fang has written for Nature, Discover and the Point Reyes Light. She is currently a lab technician at Lamont-Doherty Earth Observatory. She holds degrees from the University of California, Berkeley and Columbia University. She is based in New York. Follow her on Twitter. Disclosure