New Study Estimates Rx Drug Development Costs at $802M

The average cost of developing a new prescription drug has increased to $802 million, more than double the cost in 1987, according to a new Tufts University study released Friday, the New York Times reports. According to the study, drug companies spent about $231 million to develop a new treatment in 1987, and if the cost had risen the same as the rate of inflation, the it would have increased to $318 million in 2000. Dr. Joseph DiMasi, lead author of the study and director of economic analysis at the Tufts Center for the Study of Drug Development, said that the increased cost of human clinical trials has led to "much of the increase" in drug development costs (Pear, New York Times, 12/1). The study found that total research costs increased only 7.4% per year during the 1990s, but the cost of human clinical trials rose 12% per year (Harris, Wall Street Journal, 12/3). In addition, DiMasi said that "high failure rates" for new treatments and the time required to develop a drug -- about 12 years -- has made drug development a "pricey business" (Connolly, Washington Post, 12/1). The study also found that only 5 in 5,000 drugs that pharmaceutical companies test on animals reach human clinical trials, and on average, only one of those five drugs reaches the market (New York Times, 12/1). "Drug development is a very lengthy, technically risky process. A lot of money gets spent over a long period," DiMasi said. Tufts researchers based the study on information provided by 10 pharmaceutical companies. The Tufts center that conducted the study receives "much of its funding" from drug companies, but DiMasi said that the funds have "no strings attached" (Washington Post, 12/1).

Several consumer advocacy groups "immediately attacked" the findings of the study and dismissed the $802 million figure for drug development as "inflated" (Agovino, AP/Nando Times, 11/30). According to Clay O'Dell, a spokesperson for the Generic Pharmaceutical Association, the "suspect" study also "ignores the fact that some of the drug development costs are tax deductible and that some of the research is subsidized by the government through NIH" (New York Times, 12/1). Advocates also said that the study "focused too much" on new drugs when many treatments that reach the market each year "are updated versions of existing medicines." In addition, the $802 million figure includes $403 million that a pharmaceutical company might lose by "not having invested in something more reliable" than "risky" drug development, which advocates said "should not be figured" into the cost of drug development (AP/Nando Times, 11/30). Sidney Wolfe, director of the Health Research Group at Public Citizen, a consumer advocacy group, criticized the study as "just a thinly disguised advertisement for the pharmaceutical industry to justify continued price-gouging" (New York Times, 12/1). A Public Citizen study released earlier this year found that development of a new drug only costs $110 million, a figure that the pharmaceutical industry has called "much too low" (AP/Nando Times, 11/30). Alan Holmer, president of the Pharmaceutical Research and Manufacturers Association, said the Tufts study confirmed that "drug development is staggeringly expensive" (New York Times, 12/1). Raymond Gilmartin, president of Merck & Co., added that the study offers "important confirmatory evidence of an increasingly complex nature" of drug development (Washington Post, 12/1).