The never-ending debate about what drugs should cost is in part driven by the fact that no one seems to know what it actually costs to develop one. And now we have a new analysis from an influential think tank for what it believes to be the cost of getting a drug approved: $2.6 billion.
That's the latest projection from the Tufts Center for the Study of Drug Development, a research group partially funded by drugmakers. The new figure is more than three times higher than the group's 2001 estimate of $802 million.
The group estimates the average drug discovery and development process costs $1.4 billion. Its estimate includes another $1.2 billion in foregone returns investors would have otherwise seen while the drug was under development. The group estimates that drugmakers on average face another $312 million in research and development costs after a drug gets approved, which could bring the total average cost of development to $2.9 billion.
The prices of many popular prescription drugs have risen sharply over the last decade, leaving consumers wondering why the cost of medicine is so high — and whether pharmaceutical companies need to charge so much to cover the cost of developing drugs, or if they're merely padding their profits. With patents on blockbuster drugs expiring over the past few years, the pharmaceutical industry is under pressure to somehow make up for those losses.
The Tufts center researchers say the cost of developing a drug, when adjusted for inflation, has increased 145 percent overthe past decade. Their findings — which are drawing scrutiny from consumer advocates and academics — attribute the rising costs to higher failure rates for drugs and higher R&D costs. Drugmakers have also been tackling more complex diseases over the past decade, and they must fund research proving the cost effectiveness of new drugs, according to the report.
An overwhelming number of drugs that enter clinical trials don't actually get approved by the FDA, so drugmakers try to recover those costs when they have a successful product. Joseph DiMasi, the lead author of the CSDD study, said the group's estimate takes that into account.
“Drug development remains a costly undertaking despite ongoing efforts across the full spectrum of pharmaceutical and biotech companies to rein in growing R&D costs,” DiMasi said in a statement.
The study itself won't be released until 2015, the researchers said. So far, the Tufts center has only released a slide presentation, a press release and a backgrounder on the study methodology.
Consumer advocates say that estimates from the Tufts research center are often inflated to justify higher drug prices — and the lack of detail released so far on this latest study makes it hard to assess the claims. James Love, director of the non-profit Knowledge Ecology International, said critical information is missing from the analysis, like how many patients were in the drug trials, or how much money was claimed to have been spent on each patient.
"First impression: the study, which is part of a public relations campaign by the drug companies to justify high prices, is long on propaganda, and short of details," wrote Love in a blog post.
Doctors Without Borders was harsher in its assessment. "[I]f you believe [the Tufts analysis], you probably also believe the earth is flat," said policy director Rohit Malpani in a statement.
Other estimates vary on how much it costs to develop a drug. In 2006, Federal Trade Commission researchers tried to replicate aTufts study that pegged the cost of developing a drug at $802 million. The FTC researchers' findings, published in the policy journal Health Affairs, estimated that the average cost at the time was a little higher, at $868 million — but they found there was considerable variation based on drugmaker and the type of drug. For example, their analysis found that the average cost of drug development was $521 million for one large manufacturer, while it was $2.1 billion for another.
Merrill Goozner, in his book "The $800 Million Pill: The Truth Behind the Cost of New Drugs," writes that the actual development cost was about one-fifth of the last Tufts estimate, contending that most of the drug development relies on taxpayer-funded research. Meanwhile, a Forbes analysis last year of 100 pharmaceutical companies pegged the cost of developing a drug at $5 billion.
And so the debate over how much it costs to develop a drug — and what it should cost — goes on.