For the first time, the Tufts Center for the Study of Drug Development in the USA has produced an estimate of the average cost of developing a new biotechnology product, putting this at $1.2 billion.

Tufts said the $1.2 billion estimate reflects the costs of drugs that fail in testing and the time costs associated with bringing a new biopharmaceutical to market. Of this amount, capitalised out-of-pocket preclinical cost totaled $615 million, while similar clinical period cost totaled $626 million.

Joseph DiMasi, director of economic analysis at the Tufts CSDD, said: "while biotech offers significant promise in treating entire categories of disease for which no medicines previously existed, it comes at a significant cost."

Tufts’ estimates are not without their critics, however, with perhaps the most controversial element being the practice of including in the final figure an estimate of the return on capital used in the drug discovery process that could otherwise have been invested. In the case of a pharmaceutical, this can account to almost half the total, with the remainder accounting for out-of-pocket expenses.

In 2003, the research group updated its estimate of the cost of developing a pharmaceutical medicine, pegging this at $897 million, equating to $466 million on average in out-of-pocket costs, after including post-approval R&D costs for the first time.

In its latest analysis Tufts also found that the overall clinical approval success rate for biopharmaceutical products was 30.2% versus 21.5% for traditional drugs. However, the longer development timeline and higher capital costs for biopharmaceuticals meant that overall capitalisation costs were higher than for traditional R&D.

The results of the study were reported in the November/ December edition of Tufts CSDD Impact Report.