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Environmental Science and Technology. Royal Society of Chemistry

The full cost of bringing a new drug (i.e., new chemical entity) to market – from discovery through clinical trials to approval – is complex and controversial. Typically, companies spend tens to hundreds of millions of U.S. dollars.[5] One element of the complexity is that the much-publicized final numbers often not only include the out-of-pocket expenses for conducting a series of Phase I-III clinical trials, but also the capital costs of the long period (10 or more years) during which the company must cover out-of-pocket costs for preclinical drug discovery. Additionally, companies often do not report whether a given figure includes the capitalized cost or comprises only out-of-pocket expenses, or both.

Another element of complexity is that all estimates are based on confidential information controlled by drug companies, released by them voluntarily, leading to inability to verify costs. The numbers are controversial, as drug companies use them to justify the prices of their drugs and various advocates for lower drug prices have challenged them. The controversy is not only between “high” and “low”, but also the high numbers may vary considerably for the manifold factors in drug development.

One study assessed both capitalized and out-of-pocket costs for bringing a single new drug to market as about US$1.8 billion and $870 million, respectively.[6]

In an analysis of the drug development costs for 98 companies over a decade, the average cost per drug developed and approved by a single-drug company was $350 million.[7] But for companies that approved between eight and 13 drugs over 10 years, the cost per drug went as high as $5.5 billion, due mainly to geographic expansion for marketing and ongoing costs for Phase IV trials and continuous monitoring for safety.[7]

Alternatives to conventional drug development have the objective for universities, governments and pharmaceutical industry to collaborate and optimize resources.[8]