The latest report from The Tufts Center for the Study of Drug Development, which states that the average cost of developing a new drug is $2.56 billion, has been roundly criticised by Médecins Sans Frontières.

The Tufts figure per compound, up from $802 million in 2003, is based on “average out-of-pocket cost” of just under $1.40 billion and time costs (expected returns that investors forego while a drug is in development of $1.16 billion. The analysis argues that the cost of post-approval studies (to test new indications, formulations, dosage strengths and regimens) and to monitor safety and long-term side effects in patients required by the US Food and Drug Administration is $312 million.

This pushes up the full product lifecycle cost per approved drug to $2.87 billion. The new analysis is based on information provided by 10 pharmaceutical companies on 106 randomly selected drugs first tested in human anywhere in the world from 1995 to 2007.

Joseph DiMasi, director of economic analysis at Tufts CSDD and principal investigator for the study, said the estimate links the costs of unsuccessful projects to those that succeed. The leap has been driven mainly by increases in out-of-pocket costs for individual drugs and higher failure rates, he said.

Other factors include more complex and larger clinical trials, gathering health technology assessment information “and testing on comparator drugs to accommodate payer demands for comparative effectiveness data”.

Believe $2.56 billion figure, 'you believe earth is flat'

However Rohit Malpani, director of policy and analysis for MSF’s Access Campaign, is not convinced, saying if you believe the $2.56 billion figure, “you probably also believe the earth is flat”.
He said “if the CEO of a top pharmaceutical company (citing GlaxoSmithKline’s Sir Andrew Witty) says it’s a myth that it costs $1 billion to develop a drug, can we really take this new figure of $2.56 billion seriously? We know from past studies and the experience of non-profit drug developers that a new drug can be developed for just a fraction of the cost the Tufts report suggests”.

Mr Malpani acknowledged the cost is variable, “but experience shows that new drugs can be developed for as little as $50 million, or up to $186 million if you take failure into account, which the pharmaceutical industry certainly does – these figures are nowhere near what the industry claims is the cost”.
He went on to claim that nearly half of R&D spending “is paid for by the taxpayer or by philanthropy, and that figure continues to rise as governments do more and more to make up for the pharmaceutical industry’s R&D shortcomings”.