Tuesday, July 16, 2024

Estimating the Costs and Trends in Pharmaceutical R&D: A Comprehensive Analysis

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Pharmaceutical drug development is a complex and costly endeavor, crucial for advancing medical treatments and ensuring patient access to innovative therapies. A recent study, published by JAMA Network Open, delves into the financial intricacies of drug development, examining costs by therapeutic class and scrutinizing the trends in research and development (R&D) intensity over an 18-year period. This investigation is vital for shaping future policies aimed at reducing costs and encouraging innovation within the pharmaceutical industry, ultimately improving market access for new drugs.

Cost Analysis of Drug Development

The study utilized an economic evaluation model, integrating data from public and proprietary sources spanning from 2000 to 2018, to estimate the average cost of bringing a drug to market. The results indicate that the mean out-of-pocket cost for developing a new drug stands at approximately $172.7 million (2018 dollars). However, this figure varies significantly across therapeutic classes, ranging from $72.5 million for genitourinary drugs to $297.2 million for pain and anesthesia treatments. When including failed attempts and capital costs, the mean expected capitalized cost balloons to $879.3 million, with the highest costs observed in the pain and anesthesia category at $1756.2 million.

Trends in R&D Intensity and Sales

Despite a 15.6% decline in overall pharmaceutical sales from 2008 to 2019, R&D intensity increased from 11.9% to 17.7% during the same period. Large pharmaceutical companies, in particular, saw their R&D intensity rise from 16.6% to 19.3%, while their sales grew by 10%, from $380.0 billion to $418.0 billion. This trend suggests a growing commitment to R&D investment despite fluctuating market conditions and highlights the industry’s resilience and strategic prioritization of innovation.

Concrete and Valuable Inferences

– Pharmaceutical companies face substantial costs in drug development, which can vary widely by therapeutic class.
– Increased R&D intensity, despite declining sales, underscores a strategic shift towards greater investment in innovation.
– Policymaking should consider the high costs and risks associated with drug development to foster a supportive environment for pharmaceutical innovation.

The findings of this study have significant implications for market access, as they reveal the substantial financial burden associated with drug development. Policies aimed at reducing development costs and supporting R&D efforts can enhance the availability of new drugs, ensuring that patients have timely access to innovative treatments. By understanding the financial landscape of drug development, stakeholders can better navigate the complexities of the pharmaceutical market and promote a more competitive and innovative industry.

Original Article:

JAMA Netw Open. 2024 Jun 3;7(6):e2415445. doi: 10.1001/jamanetworkopen.2024.15445.

ABSTRACT

IMPORTANCE: Understanding the cost of drug development can help inform the development of policies to reduce costs, encourage innovation, and improve patient access to drugs.

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OBJECTIVE: To estimate the cost of drug development by therapeutic class and trends in pharmaceutical research and development (R&D) intensity over time.

DESIGN, SETTING, AND PARTICIPANTS: In this economic evaluation study, an analytical model of drug development constructed using public and proprietary sources that collectively cover data from 2000 to 2018 was used to estimate the cost of bringing a drug to market, overall and for specific therapeutic classes. The analysis for the study was completed in October 2020.

MAIN OUTCOMES AND MEASURES: Three measures of development cost from nonclinical through postmarketing stages were estimated: mean out-of-pocket cost or cash outlay, mean expected cost, and mean expected capitalized cost. Pharmaceutical R&D intensity, defined as the ratio of R&D spending to total sales, from 2008 to 2019, based on the time frame for available data, was also analyzed.

RESULTS: The estimated mean cost of developing a new drug was approximately $172.7 million (2018 dollars) (range, $72.5 million for genitourinary to $297.2 million for pain and anesthesia), inclusive of postmarketing studies. The cost increased to $515.8 million when cost of failures was included. When the costs of failures and capital were included, the mean expected capitalized cost of drug development increased to $879.3 million (range, $378.7 million for anti-infectives to $1756.2 million for pain and anesthesia); results varied widely by therapeutic class. The pharmaceutical industry as a whole experienced a decline of 15.6% in sales but increased R&D intensity from 11.9% to 17.7% from 2008 to 2019. By contrast, R&D intensity of large pharmaceutical companies increased from 16.6% to 19.3%, whereas sales increased by 10.0% (from $380.0 to $418.0 billion) over the same 2008 to 2019 period, even though the cost of drug development remained relatively stable or may have even decreased.

CONCLUSIONS AND RELEVANCE: In this economic evaluation of new drug development costs, even though the cost of drug development appears to have remained stable, R&D intensity of large pharmaceutical companies remained relatively unchanged, despite substantial growth in revenues during this period. These findings can inform the design of drug-related policies and their potential impacts on innovation and competition.

PMID:38941099 | DOI:10.1001/jamanetworkopen.2024.15445

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