Cost of developing new medicine swelled to $802 million,
research study reports
By: Gardiner Harris
The Wall Street Journal, December 3, 2001
PHILADELPHIA -- Researchers at Tufts
University said Friday that the average cost of discovering and developing
a new medicine has risen to $802 million -- a number bound
be swept up into the debate over drug prices.
The study said research costs have risen
2.5 times in inflation-adjusted terms since 1987, when Tufts found that
the average research expense for a drug was $231 million. While total
research costs increased 7.4% annually in the 1990s, clinical costs -- the
of research associated with testing
drugs in humans -- rose 12%, said Joseph DiMasi, the study's lead author.
& Co. Chairman and Chief Executive Raymond V. Gilmartin attended
the unveiling of the Tufts data at a Philadelphia hotel and said increased
clinical costs stem from demands by managed-care buyers that drug
companies prove the value of their drugs in larger and longer trials.
"The number of patients in a new
drug trial has increased from about 1,300 in the early 1980s to more than
4,000 for a typical new medicine today," Mr. Gilmartin said.
Dr. DiMasi has been issuing
research-cost estimates for years based upon proprietary surveys of top
drug companies. His numbers are routinely cited by industry backers to
justify the ever-rising prices of new drugs. Just as often, consumer
advocates dispute Dr. DiMasi's findings by criticizing his methods.
For instance, only $403 million of Dr.
DiMasi's $802 million total are actual out-of-pocket expenses. The rest is
an estimated cost of capital -- or the return that investing the money at
an 11% rate of return would have earned over time. Bob Young, a researcher
at the consumer group Public Citizen, says such accounting costs inflate
the overall number.
"The bottom line is that
pharmaceutical companies are still making wheelbarrows of money," Mr.
There are no winners in this dispute.
Whether the average is $802 million or half that, there is little doubt
that the costs of drug research and the chances of failure in the lab are
Big pharmaceuticals companies are
spending much more on research in recent years, but their labs' output has
actually fallen at the same time. Biotechnology companies have collected
billions of dollars from investors, but very few have launched drugs.
"It's not necessarily disaster if
what's coming out of the process is valuable and we as a society are
willing to pay for it," Dr. DiMasi said.
Mr. Gilmartin said his company is
working hard to bring down the cost of research by investing in new
genomics technology in hopes that better information will reduce the
number of expensive failures in drug development. But drug-company
executives have been touting for years the efficiencies that new
technologies will bring to their labs, and each year the cost of research
nonetheless goes up.
As for the politics surrounding the
DiMasi study, Mr. Gilmartin said the DiMasi study sheds no light on drug
prices. "The price of medicines is not determined by their research
costs," Mr. Gilmartin said. "Instead, it is determined by their
value in preventing and treating disease."
Mr. Gilmartin also argued that, given
the enormous cost of research, big pharmaceuticals companies, not small
biotechnology firms, are essential for developing medicines. He also said
that patent-protection laws, which have come under attack by some
drug-company critics, are vital to encouraging and protecting such huge
The study found that the average
development time for new medicines is 12 years.