New Drugs Cost $4b – $11b To Develop

Written by on February 16, 2012 in New Rosacea Treatments with 1 Comment

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.

Forbes Calculates Average Drug Development Cost at $4-$11 Billion

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 Truly Staggering Cost Of Inventing New Drugs

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.

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About the Author: David Pascoe started the Rosacea Support Group in October 1998. .

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1 Reader Comment

  1. Paul says:

    Excuse me, but I am now going to laugh at you for being a total SUCKER! ROFLMAO! TEARS IN MY EYES!
    Ok, having said that, I will now proceed to explain something to you. In this case, SOOLANTRA.
    The active ingredient in soolantra is ivermectin. Ivermectin is an old insecticide, and has been used for similar purposes in animals for more than a generation. It was discovered in the 70’s.
    The cost of ivermectin for veterinary purposes is pretty much nil, a tube of ivermectin cream for worming horses costs about 3$.
    High concentration stuff for getting parasites off the backs of cattle is about 100$ per gallon.
    So what “expense” was Nestle out in “developing” ivermectin?
    Well, development cost of the original formula was ZERO. They didn’t do that.
    Ok animal testing was certainly waived, unless they just wanted to do it, because it’s been used in animals for a couple of generations now. The animal reactions are well known. And, BTW, cosmetics companies do that kind of testing constantly, and SOMEHOW, lipstick isn’t 500$ per tube.
    So what did they do?
    They mixed ivermectin with cold cream, tested for stability, and then had a clinical trial.
    That’s it. All that “billions and billions” that was blathered about here, and what it boiled down to was “they mixed it and tested after a few weeks, then they had a clinical trial”.
    That’s not “billions and billions”. Not in anyone’s universe.
    And gee whiz, it’s gone up from 275$ to 500$ at the discount pharmacy.
    So for ten cents worth of what amounts to a slightly different formulation for horse wormer, Nestle is charging 500$.
    Get a grip. And yeah, we’re all suckers.

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