R&D Costs and Returns to New Drug Development: A Review of the Evidence

© 2012 by Oxford University Press. All rights reserved.This article reviews the extensive literature on R&D costs and returns. The first section focuses on R&D costs and the various factors that have affected the trends in real R&D costs over time. The second section considers economic studies on the distribution of returns in pharmaceuticals for different cohorts of new drug introductions. It also reviews the use of these studies to analyze the impact of policy actions on R&D costs and returns. The final section concludes and discusses open questions for further research.

The price of innovation: new estimates of drug development costs.

The research and development costs of 68 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 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 new drug is 403 million US dollars (2000 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 11% yields a total pre-approval cost estimate of 802 million US dollars (2000 dollars). When compared to the results of an earlier study with a similar methodology, total capitalized costs were shown to have increased at an annual rate of 7.4% above general price inflation.

Clinical practice guidelines for the management of cryptococcal disease: 2010 update by the infectious diseases society of america.

Cryptococcosis is a global invasive mycosis associated with significant morbidity and mortality. These guidelines for its management have been built on the previous Infectious Diseases Society of America guidelines from 2000 and include new sections. There is a discussion of the management of cryptococcal meningoencephalitis in 3 risk groups: (1) human immunodeficiency virus (HIV)-infected individuals, (2) organ transplant recipients, and (3) non-HIV-infected and nontransplant hosts. There are specific recommendations for other unique risk populations, such as children, pregnant women, persons in resource-limited environments, and those with Cryptococcus gattii infection. Recommendations for management also include other sites of infection, including strategies for pulmonary cryptococcosis. Emphasis has been placed on potential complications in management of cryptococcal infection, including increased intracranial pressure, immune reconstitution inflammatory syndrome (IRIS), drug resistance, and cryptococcomas. Three key management principles have been articulated: (1) induction therapy for meningoencephalitis using fungicidal regimens, such as a polyene and flucytosine, followed by suppressive regimens using fluconazole; (2) importance of early recognition and treatment of increased intracranial pressure and/or IRIS; and (3) the use of lipid formulations of amphotericin B regimens in patients with renal impairment. Cryptococcosis remains a challenging management issue, with little new drug development or recent definitive studies. However, if the diagnosis is made early, if clinicians adhere to the basic principles of these guidelines, and if the underlying disease is controlled, then cryptococcosis can be managed successfully in the vast majority of patients.

Cost of innovation in the pharmaceutical industry.

The research and development costs of 93 randomly selected new chemical entities (NCEs) were obtained from a survey of 12 U.S.-owned pharmaceutical firms. These data were used to estimate the pre-tax average cost of new drug development. The costs of abandoned NCEs were linked to the costs of NCEs that obtained marketing approval. For base case parameter values, the estimated out-of-pocket cost per approved NCE is $114 million (1987 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a 9% discount rate yielded an average cost estimate of $231 million (1987 dollars).