Screen Shot 2015-01-12 at 11.42.19 AMThere has been much debate over the new study the Tufts Center for the Study of Drug Development recently released on the cost of developing and bringing a new drug to market.  While the analysis reported the average cost is approximately $2.6B, many industry insiders feel this number is far too high. Zach Brennan of Outsourcing-Pharma recently wrote about the debate and spoke to several industry experts for their insight and reaction to this latest analysis.

Brennan points out that,

“Tufts CSDD previously estimated the cost of developing a new drug in 2003 at about $800M, which would mean the cost of R&D has skyrocketed more than 140% between the two studies.”

Why the large increase? Clinical trial complexity, larger clinical trial sizes, higher cost of inputs from the medical sector used for development, greater focus on targeting chronic and degenerative diseases and a generally disappointing rate of development success are just a few reasons cited by the principal investigator of the Tufts study.

We have seen quite a bit of backlash from many in the industry, including groups such as Doctors without Borders and the non-profit Knowledge Economy International, who feel this is a ploy by Big Pharma to justify high prices for new drugs.

From our perspective, having served the small to mid-sized biopharma clients, we’re confident the development cost is much lower. As I shared in the Outsourcing-Pharma article:

“In many cases, these drugs can get through development for under $500M. This is because they have a shorter discovery phase and process far fewer candidates. Often they in-license a compound and avoid a prolonged discovery cycle all together. While it’s true that even an in-licensed drug carries a sunk cost prior to arriving at the doorsteps of a developer, it does not carry the cost of an entire discovery program you might typically find in a large pharmaceutical company.”

However, it is important to note that,

“On the other hand, we have seen investigator grants costs, particularly in the US, increase faster than nominal inflation, but we have seen this offset by more global studies that include lower-cost regions and muted European inflation.”

To read the Outsourcing-Pharma article in its entirety, click here.

Comments from the Outsourcing-Pharma article on the Tufts CSDD study were also picked up in The Economist.

No doubt it’s a very lively debate that will continue for some time. Do you think development pricing differs dramatically for small and mid-sized biopharma versus larger pharmaceutical companies? Does this price tag leave room to encourage innovation, and if so, at what cost? Would love to hear your feedback – please share your comments below.