The Costs of Clinical Trials and Drug Development

A recent report published in Pharmalot  shows that the cost of conducting clinical trials has risen to staggering figures.  Across all therapeutic areas, the average cost per patient in phase 1 trials rose from $15,023 in 2008 to 21,882 in 2011.  For phase 2 trials, the costs rose from 21,009 to $36,070 and in phase 3b trials, the costs increased from $25,707 to $47,095. If one adds the R&D costs to these, then one should not be surprised than billion dollar estimates have been proposed.  Whether costs are really this high is controversial and the debate continues.

Current estimates place the costs of developing new drugs somewhere between $1.0 billion to $1.5 billion.  A report by Pharmaceutical Research and Manufacturers of America (PhRMA) estimated that the costs for drug development were  $1.38 billion in 2005. This figure was of course much higher than the previously reported and often quoted cost of $802 million (see DiMasi et al].   The most recent estimates come from a report commissioned by an independent UK research organization called the Office of Health Economics and summarized recently in The Burrill Report .  Despite the staggering costs, the success rate for bringing a new drug from early human trials to market has declined to 1 in 10.  The issue of increasing costs of clinical trials and the causes of this increase has been studied in a recent report written by Avik S. A. Roy, a Senior Fellow, Manhattan Institute for Policy Research, entitled ” Stifling New Cures: The True Cost of Lengthy Clinical Drug Trials”.  The report can be accessed as a pdf document at the Manhattan Institute website.

The cost estimates vary depending on the methodology used, the type of therapy and the company developing the drug.  Christopher Adams and Van Brantner from the Bureau of Economics, Federal Trade Commission, used estimates similar to those of DiMasi et al. but a publicly available database to reach their cost estimates [see here].   They concluded that [estimates vary from around $500 million to more than $2 billion, depending on the therapy or the developing firm].  Recent reports are critical of the costs calculated by PhRMA and the pharmaceutical industry as a whole.  They suggest that such figures may have been inflated and that the real cost of drug development may be much lower.  This issue was recently addressed in an editorial written by Michael Hiltzik in Aug 3, 2011 in Los Angeles Times.  The editorial is based on the findings of a recent article written by Donald Light and Rebecca Warburton in BioSocieties.

© Copyright M. Loghman-Adham, MD

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