Innovation in the pharmaceutical industry: New estimates of R&D costs.

Published

Journal Article

The research and development costs of 106 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug and biologics development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per approved new compound is $1395 million (2013 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 10.5% yields a total pre-approval cost estimate of $2558 million (2013 dollars). When compared to the results of the previous study in this series, total capitalized costs were shown to have increased at an annual rate of 8.5% above general price inflation. Adding an estimate of post-approval R&D costs increases the cost estimate to $2870 million (2013 dollars).

Full Text

Duke Authors

Cited Authors

  • DiMasi, JA; Grabowski, HG; Hansen, RW

Published Date

  • May 2016

Published In

Volume / Issue

  • 47 /

Start / End Page

  • 20 - 33

PubMed ID

  • 26928437

Pubmed Central ID

  • 26928437

Electronic International Standard Serial Number (EISSN)

  • 1879-1646

International Standard Serial Number (ISSN)

  • 0167-6296

Digital Object Identifier (DOI)

  • 10.1016/j.jhealeco.2016.01.012

Language

  • eng