for release
Tuesday
January 7, 2025
The typical cost of developing new drugs may not be as high as commonly thought, according to a new RAND study, and some ultra-expensive drugs are distorting the public debate about drug research and development costs. I found out that
Using a new method to assess research and development spending for 38 drugs recently approved by the U.S. Food and Drug Administration, researchers found that the average cost of new drug development was the midpoint (median) development cost.
The researchers estimated the median direct R&D cost to be $150 million, but the average was $369 million.
The costs were even higher when adjusted for the profits that drug developers would have made if they had invested these amounts in other activities or in drugs that never made it to market. With these adjustments, the researchers estimated a median R&D cost of $708 million across the 38 drugs they studied, with a few high-cost outliers pushing the average cost to $1.3 billion. did.
The average cost of new drug development decreased by 26%, from $1.3 billion to $950 million, excluding just two drugs. The findings are published in the journal JAMA Network Open.
“Our study suggests that developing a typical new drug may be less expensive than previously estimated,” said the study’s lead author, a nonprofit research institute said Andrew Mulcahy, a RAND senior policy fellow. “Reliable R&D cost estimates are essential for assessing the appropriateness of incentives such as patent regulatory exclusivity and other rules that ensure drug developers achieve a fair return on their investments. ”
Remarkable advances in medicine, including breakthroughs such as treatments for COVID-19 and treatments for hepatitis C, have been driven by investments in pharmaceutical research and development. These successes were demonstrated through a lively debate about the extent to which U.S. drug price regulations reduce investment in new drugs.
The pharmaceutical industry claims that lower prices will have a devastating impact on research and development. By contrast, the Congressional Budget Office projects that efforts to lower drug prices for Medicare beneficiaries will reduce the number of new drugs by just 1% over 30 years.
RAND researchers estimated spending on new drug research and development by examining annual public information about spending that companies report to the U.S. Securities and Exchange Commission. The analysis includes information on over 200 listed companies from 2014 to 2019.
The study used Citeline’s Trialtrove database of clinical trials to examine clinical trial activity for each of the 38 new drugs approved for clinical use by the FDA in 2019.
To better account for variations in the intensity of clinical research and the full scope of bringing new drugs to market, this study analyzes company-wide R&D costs and activities over a six-year period from all drug developers surveyed. The data were used to calculate costs per patient month.
The study found that the 20 largest companies accounted for 81% of all patient-months and had 27% lower average and median costs per patient-month compared to other drug companies.
The researchers noted that the finding that the average cost of new drug development is skewed by a few very expensive drugs likely weighs heavily on policy discussions about high drug costs in the United States. They say this suggests that median cost is a better tool. .
“The new approach we used gives us great confidence that we will recover more of our research and development expenditures compared to previous studies of this type,” Mulcahy said.
Support for this research was provided by Arnold Ventures. Other authors of the study are Stephanie Rennane, Daniel Schwam, Reid Dickerson, Lawrence Baker, and Kanaka Shetty.
RAND Health Care promotes a healthier society by improving health systems in the United States and other countries.
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