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PharmacoEconomics

, Volume 7, Issue 2, pp 152–169 | Cite as

Research and Development Costs for New Drugs by Therapeutic Category

A Study of the US Pharmaceutical Industry
  • Joseph A. DiMasi
  • Ronald W. Hansen
  • Henry C. Grabowski
  • Louis Lasagna
Original Research Article

Summary

The clinical period (i.e. clinical trial and long term animal testing) development costs of a random sample of new chemical entities (NCEs) were examined for differences in average cost. All of the NCEs studied were first tested in humans between 1970 and 1982, and were classified for the purposes of the study by therapeutic class. The costs of unsuccessful projects were included with those of projects that resulted in US marketing approval.

Including income forgone from expending funds before returns are earned (‘time costs’), the capitalised (i.e. out-of-pocket plus time) clinical period costs per approved NCE were $US70, $US98, $USI03 and $US163 million (1993 dollars) for anti-infective, cardiovascular, neuropharmacological and nonsteroidal anti-inflammatory drugs, respectively. Combining the data for all therapeutic categories, the mean clinical period cost per approved NCE was $US93 million.

Omitting costs associated with unsuccessful projects, the mean capitalised clinical period costs for approved NCEs ranged from $US7.1 million (for topical steroids) to $US66.7 million (for cardiovascular agents) [ 1993 dollars ].

The estimates of total clinical period costs per approved NCE depend on average out-of-pocket clinical phase costs, attrition rates across phases (i.e. the rates at which compounds drop out of active testing), the probability of marketing approval and deve lopment and regulatory review times. Phase attrition and approval rates are the most imponant sources of variability in total clinical period costs between therapeutic categories.

Development cost estimates by therapeutic category did not correlate strongly with US sales in the fifth year of marketing. Cardiovascular NCEs had much higher than average sales revenues but clinical development costs for these drugs were only slightly above average. Conversely, nonsteroidal anti-inflammatory drugs attained average sales revenues but had much higher than average development costs.

Keywords

Discount Rate Chemical Entity Clinical Success Rate Development Cost Therapeutic Class 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Adis International Limited 1995

Authors and Affiliations

  • Joseph A. DiMasi
    • 1
  • Ronald W. Hansen
    • 2
  • Henry C. Grabowski
    • 3
  • Louis Lasagna
    • 1
  1. 1.Tufts Center for the Study of Drug DevelopmentTufts UniversityBostonUSA
  2. 2.William E. Simon Graduate School of Business AdministrationUniversity of RochesterRochesterUSA
  3. 3.Department of EconomicsDuke UniversityDurhamUSA

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