New drug development costs often lower than drugmakers admit, study suggests

The average cost to develop a drug may be significantly lower than the figure drugmakers often cite, suggests a study published March 3 in the Journal of the American Medical Association

Drugmakers often say the high cost of developing new drugs is a main reason drug costs have to be set so high, STAT reported. 

A group of researchers at Tufts University in Medford, Massachusetts, determined the average cost of bringing a drug to the market to be $2.8 billion in a 2014 study. That number is often cited by drugmakers when justifying their drugs' prices.

In the study released March 3, a group of researchers from the Department of Health Policy at the London School of Economics and Political Science said that number is actually closer to $1.3 billion.

The report analyzed publicly available data from filings drugmakers submitted to the U.S. Securities and Exchange Commission and analyzed data for 63 new drugs approved between 2009 and 2018. 

Based on the data, the researchers said it costs an average of $844.8 million in out-of-pocket costs and $451.1 million in so-called opportunity costs to develop a new drug. The older Tufts study estimated opportunity costs alone at $1.16 billion.  

However, the new study focused mostly on smaller drugmakers that tend to choose cheaper research projects, according to STAT. The older study from Tufts focused on mid to large-sized drugmakers. 

Additionally, the development costs varied dramatically based on the disease being treated. The median cost of a drug to treat nervous system disorders was $765.9 million, while the median cost to develop a cancer drug was $2.7 billion. 

Henry Grabowski, PhD, a professor at Duke University in Durham, N.C., who studies the pharmaceutical industry, told STAT the data used for the new report was mostly for orphan drugs and those that received accelerated approval, which have policy incentives that lower costs of research and development. 

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