A recent Forbes article details the truly amazing cost of developing a new drug. Whilst the pharmaceutical company best know to rosacea sufferers – Galderma, is not mentioned in the list of companies R&D spending, we can assume that their costs for the whole of the development cycle for drugs like Sansrosa/CD07805/47 would be comparable.
Even though products like Oracea are too expensive, it is only through long term sales that pharmaceutical companies can hope to recoup their R&D expenditure.
Seeking a more rigorous estimate, Mr. Herper and Forbes writer Scott DeCarlo combined Mr. Munos’ drug approval counts with the research and development spending for a dozen major pharmaceutical companies, as reported in annual earnings filings over the past fifteen years (pulled from a Thomson Reuters database using FactSet), and adjusted the resulting figures for inflation. Their calculations showed that of the twelve pharma companies, AstraZeneca spent the most R&D money per approved drug (nearly $11.8 billion) and Amgen spent the least (almost $3.7 billion). The other companies on Forbes’ list were Novartis, Bristol-Myers Squibb, Merck, Abbott Laboratories, Eli Lilly, Johnson & Johnson, Pfizer, Roche, Sanofi, and GlaxoSmithKline. The number of drug approvals, R&D spending per drug approval, and total R&D spending for each of the above companies can be found in the Forbes article.
The range of money spent is stunning. AstraZeneca has spent $12 billion in research money for every new drug approved, as much as the top-selling medicine ever generated in annual sales; Amgen spent just $3.7 billion. At $12 billion per drug, inventing medicines is a pretty unsustainable business. At $3.7 billion, you might just be able to make money (a new medicine can probably keep generating revenue for ten years; invent one a year at that rate and you’ll do well).
There are lots of expenses here. A single clinical trial can cost $100 million at the high end, and the combined cost of manufacturing and clinical testing for some drugs has added up to $1 billion. But the main expense is failure. AstraZeneca does badly by this measure because it has had so few new drugs hit the market. Eli Lilly spent roughly the same amount on R&D, but got twice as many new medicines approved over that 15 year period, and so spent just $4.5 billion per drug.