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Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018

Educational Objective
To learn the research and development investment required to bring a new therapeutic agent to market.
1 Credit CME
Key Points

Question  How much do drug companies spend on research and development to bring a new medicine to market?

Findings  In this study, which included 63 of 355 new therapeutic drugs and biologic agents approved by the US Food and Drug Administration between 2009 and 2018, the estimated median capitalized research and development cost per product was $1.1 billion, counting expenditures on failed trials. Data were mainly accessible for smaller firms, products in certain therapeutic areas, orphan drugs, first-in-class drugs, therapeutic agents that received accelerated approval, and products approved between 2014 and 2018.

Meaning  This study provides an estimate of research and development costs for new therapeutic agents based on publicly available data; differences from previous studies may reflect the spectrum of products analyzed and the restricted availability of data in the public domain.

Abstract

Importance  The mean cost of developing a new drug has been the subject of debate, with recent estimates ranging from $314 million to $2.8 billion.

Objective  To estimate the research and development investment required to bring a new therapeutic agent to market, using publicly available data.

Design and Setting  Data were analyzed on new therapeutic agents approved by the US Food and Drug Administration (FDA) between 2009 and 2018 to estimate the research and development expenditure required to bring a new medicine to market. Data were accessed from the US Securities and Exchange Commission, Drugs@FDA database, and ClinicalTrials.gov, alongside published data on clinical trial success rates.

Exposures  Conduct of preclinical and clinical studies of new therapeutic agents.

Main Outcomes and Measures  Median and mean research and development spending on new therapeutic agents approved by the FDA, capitalized at a real cost of capital rate (the required rate of return for an investor) of 10.5% per year, with bootstrapped CIs. All amounts were reported in 2018 US dollars.

Results  The FDA approved 355 new drugs and biologics over the study period. Research and development expenditures were available for 63 (18%) products, developed by 47 different companies. After accounting for the costs of failed trials, the median capitalized research and development investment to bring a new drug to market was estimated at $1141.7 million (95% CI, $888.1 million-$1480.8 million), and the mean investment was estimated at $1559.1 million (95% CI, $1271.0 million-$1893.8 million) in the base case analysis. Median estimates by therapeutic area (for areas with ≥5 drugs) ranged from $765.9 million (95% CI, $323.0 million-$1473.5 million) for nervous system agents to $2771.6 million (95% CI, $2051.8 million-$5366.2 million) for antineoplastic and immunomodulating agents. Data were mainly accessible for smaller firms, orphan drugs, products in certain therapeutic areas, first-in-class drugs, therapeutic agents that received accelerated approval, and products approved between 2014 and 2018. Results varied in sensitivity analyses using different estimates of clinical trial success rates, preclinical expenditures, and cost of capital.

Conclusions and Relevance  This study provides an estimate of research and development costs for new therapeutic agents based on publicly available data. Differences from previous studies may reflect the spectrum of products analyzed, the restricted availability of data in the public domain, and differences in underlying assumptions in the cost calculations.

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CME Disclosure Statement: Unless noted, all individuals in control of content reported no relevant financial relationships. If applicable, all relevant financial relationships have been mitigated.

Article Information

Corresponding Author: Olivier J. Wouters, PhD, Department of Health Policy, London School of Economics and Political Science, Houghton Street, London WC2A 2AE, United Kingdom (o.j.wouters@lse.ac.uk).

Accepted for Publication: January 28, 2020.

Correction: This article was corrected on September 20, 2022, to fix multiple data points affected by a correction in one of the sources used in some of the original calculations; affected data were corrected in the abstract, text, several tables, Figure 2, and the Supplement.

Author Contributions: Dr Wouters had full access to all of the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis.

Concept and design: Wouters.

Acquisition, analysis, or interpretation of data: All authors.

Drafting of the manuscript: Wouters.

Critical revision of the manuscript for important intellectual content: All authors.

Statistical analysis: Wouters.

Administrative, technical, or material support: All authors.

Supervision: Wouters.

Conflict of Interest Disclosures: Dr McKee reported receipt of grants from the Wellcome Trust, European Commission, and United Kingdom Research and Innovation outside the submitted work. No other disclosures were reported.

Data Sharing Statement: All data used in this study were in the public domain. An example data extraction file is available from the corresponding author upon request.

Additional Contributions: We thank Evelyn S. Warner, MSc (Duff and Phelps, UK), for her contribution to the study design and data collection, as well as her comments on an earlier draft of the manuscript. We thank Jouni Kuha, PhD (London School of Economics and Political Science, UK), and Geert Verbeke, PhD (KU Leuven, Belgium), for input on the statistical analysis, as well as Alistair Milne, PhD (Loughborough University, UK), and Max King, BA (retired; formerly Investec Asset Management, UK), for advice on costing capital investments. None of the individuals listed in the acknowledgments received compensation for their role in the study.

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