It could be $161 million, or $1.8 billion, or maybe $2.6 billion


Takeaways

  1. The U.S. Food and Drug Administration (USDA) determines regulations for the pharmaceutical industry.
  2. It generally takes 10 to 15 years to develop a new drug from inception to approval.
  3. Total cost estimates range from $161 million to $2.6 billion.

The FDA regulates over $1 trillion worth of consumer goods every year—25% of all U.S. consumer spending. Its more than 10,000 full-time employees are spread across multiple sub-agencies, including the Center for Food Safety and Applied Nutrition, the Center for Veterinary Medicine, and the Center for Devices and Radiological Health.

Within the FDA, the Center for Drug Evaluation and Research (CDER) and the Center for Biologics Evaluation and Research (CBER) control the regulatory process for pharmaceuticals.

According to Tufts Center for the Study of Drug Development, it takes $2.6 billion to successfully develop a new drug. In 2001, it estimated the cost to be just $800 million ($1 billion in 2013 dollars). Joseph A. DiMasi, director of economic analysis at Tufts CSDD, outlined the rising costs:

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. Because the R&D process is marked by substantial technical risks, with expenditures incurred for many development projects that fail to result in a marketed product, our estimate links the costs of unsuccessful projects to those that are successful in obtaining marketing approval from regulatory authorities.

And that makes sense. Friends of Cancer Research outlined that the drug approval process relies on a public-private partnership between CDER and drug sponsors—the organizations (primarily pharmaceutical and biotech companies) responsible for developing new drugs.

“The process is rigorous,” it says. “Only a small portion of the drugs submitted to CDER are approved. Regulators and sponsors work together to ensure that the process is as efficient as possible. Even so, it takes an estimated 8.5 years on average for a sponsor to bring a drug from early laboratory discovery to approval for human use.”

But, methodology matters.

Public Citizen came up with $161 million. And according to The New York Times, “a systematic review of studies that looked at the cost of drug development was published in Health Policy. The review found 13 articles, with estimates ranging from $161 million to $1.8 billion (in 2009 dollars).”

Either way, more transparency is needed.

One option is to run more publicly funded trails. According to Roger Collier at the Canadian Medical Association Journal. “This could provide greater insight into actual costs and lead to more efficient trail designs,” he says.

Regardless, it doesn’t seem like the pharmaceutical industry will go away anytime soon. “You can’t say that they are suffering,” says University of Victoria economist Rebecca Warburton. “They spend more on marketing than they do on research.”


Learn More

  1. Cost to Develop New Pharmaceutical Drug Now Exceeds $2.5B — Scientific American
  2. Does it really cost $2.6 billion to develop a new drug? — The Washington Post
  3. Drug development cost estimates hard to swallow — National Center for Biotechnology Information