title: The price of innovation: new estimates of drug development costs.
abstract: 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.
authors.affiliation: Tufts Center for the Study of Drug Development, Tufts University, 192 South Street, Suite 550, Boston, MA 02111, USA. joseph.dimasi@tufts.edu
authors.forename: Joseph A
authors.initials: JA
authors.lastname: DiMasi
authors.forename: Ronald W
authors.initials: RW
authors.lastname: Hansen
authors.forename: Henry G
authors.initials: HG
authors.lastname: Grabowski
mesh_terms: D002201:Capital Expenditures / Q000706:statistics & numerical data*; D003365:Costs and Cost Analysis; D003625:Data Collection; D017277:Drug Approval / Q000191:economics; D004341:Drug Evaluation / Q000191:economics*; D004353:Drug Evaluation, Preclinical / Q000191:economics; D004345:Drug Industry / Q000191:economics*; D015507:Drugs, Investigational / Q000191:economics; D006801:Humans; D007250:Inflation, Economic; D009936:Organizational Innovation; D012109:Research Support as Topic / Q000191:economics*; D014481:United States
chemical_list: D015507:Drugs, Investigational