PHILADELPHIA – Nov. 30, 2001 – The Tufts Center for the Study of Drug Development today announced that the average cost to develop a new prescription drug is $802 million.

That figure is the major conclusion of a recently completed in-depth study conducted by the Tufts Center based on information obtained directly from research based drug companies.

Today’s announcement updates a similar study done by the Tufts Center a decade ago, when the average cost to develop a new drug was estimated to be $231 million, in 1987 dollars.

“Bringing new drugs to market has always been an expensive, high-risk proposition, and our latest analysis indicates that costs have continued to skyrocket,” said Tufts Center Director Dr. Kenneth I Kaitin.

He added, “The single largest challenge facing drug developers — both pharmaceutical and biotechnology companies — is to contain R&D costs and reduce development times without compromising clinical test design. It’s a tall order.”

Over the past two decades, the Tufts Center’s comprehensive studies on the cost to develop a new drug have been consistently cited worldwide as providing the most reliable estimate of the total cost of new drug development.

Related Tufts Center research has found that it takes between 10 and 15 years to develop a new prescription medicine and win approval to market it in the United States.

Reasons Behind the Rising Cost of Drug Development

Had costs increased at the pace of inflation, the average cost of new drug development would have risen from $231 million in 1987 dollars to $318 million in 2000 dollars, according to Dr. Joseph A. DiMasi, director of economic analysis at the Tufts Center and the principal investigator for the latest study. Instead, the new study found that the average cost of new drug development had increased to $802 million in 2000 dollars.

DiMasi attributes much of the increase in the total cost of new drug development beyond inflation to rising clinical trial costs.

“The difficulty in recruiting patients into clinical trials in an era when drug development programs are expanding, and the increased focus on developing drugs to treat chronic and degenerative diseases, has added significantly to clinical costs,” said DiMasi.

Included in the drug cost analysis are expenses of project failures and the impact that long development times have on investment costs. The estimate also accounts for out-of-pocket clinical costs, out-of-pocket discovery and pre-clinical development costs, clinical success and phase attrition rates, as well as the cost of capital.

Among the study’s key findings were the following:

• The full capitalized resource cost of new drug development was estimated to be $802 million (2000 dollars). This estimate accounts for the cost of failures, including research on compounds abandoned during development, as well as opportunity costs of incurring R&D expenditures before earning any returns.

• When compared to the results for previous similar studies, the R&D cost per approved new drug increased 2.5 times in inflation-adjusted terms.

• After adjusting for inflation, the out-of-pocket cost per approved new drug increased at a rate of 7.6% per year between the 1991 study and the current study. The annual rate of growth in capitalized cost between the two studies was 7.4% in inflation-adjusted terms.

• While costs have increased in inflation-adjusted terms for all R&D phases, the increases were particularly acute for the clinical period. The inflation-adjusted annual growth rate for capitalized clinical costs (11.8%) was more than five times greater than that for pre-clinical R&D.

About the Tufts Center for the Study of Drug Development

Based in Boston, Mass. and affiliated with Tufts University, the Tufts Center for the Study of Drug Development (http://csdd.tufts.edu) provides strategic information to help drug developers, regulators, and policy makers improve the quality and efficiency of pharmaceutical development, review, and utilization. The Tufts Center conducts a wide range of in-depth analyses on pharmaceutical issues and hosts symposia, workshops, and public forums on related topics throughout the year.