Study says drug development costs much less than previously estimated

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Four years ago, the Tufts Center for the Study of Drug Development estimated that it costs $2.6 billion to bring a new drug to market. New research published Monday in JAMA Internal Medicine posits that the price is closer to a quarter of that sum: $648 million.

Researchers analyzed SEC filings for 10 drug companies from 2006 to 2015 and concluded that the cost of developing a new cancer drug is $648 million. These companies had a cancer drug approved by the FDA between 2006 and 2015, but did not have an FDA-approved drug on the market prior to that approval.

Holly Campbell, a spokesperson for PhRMA, wrote in an emailed statement that the study understates investments made by biopharmaceuticals companies “by focusing only on companies that have been successful.” She added that “setbacks are an inevitable part of the R&D process.”

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A common justification for high drug prices by pharma companies is that they are necessary to recoup R&D investments and incentivize future research. The study found that total revenue from the approved drugs was more than seven times higher than the R&D costs incurred by the 10 companies — $67 billion, compared to total R&D spending of $7.2 billion.

The previous estimate of $2.6 billion was put forth by the Tufts Center for the Study of Drug Development in 2013, revising an estimate of $800 million made in 2001. Tufts receives grants from drugmakers and companies that provide contract research services to pharma companies.

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FDA commissioner Scott Gottlieb told attendees Monday at RAPS' Regulatory Convergence conference that the costs of drug development are “too high, and growing.” He noted that development costs in early-stage trials are outpacing those in later stages. “By front-loading the cost of drug discovery, the broader biomedical community is making it harder to advance new ideas. It's economically harder to capitalize the cost of an early stage drug program, relative to funding a later stage project,” he said.

Gottlieb pointed out some of the steps the agency plans to take to reduce these costs. They include increased FDA investment in computing tools to better evaluate clinical information and the release of ten new disease-specific guidance documents over the next year. Those guidelines will detail how the agency plans to approach the development and evaluation of drugs for unmet needs.

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