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Reducing Drug Development Costs

Modern medicine has made incredible advances with treatments that have changed the prospects for many diseases. The healthcare and pharmaceutical industries are essential for driving the innovation behind these advances. Importantly, these industries are a vital part of our world economy. While great advances in drug development have been made, there has been a high price tag attached, and the drug development costs have increased steadily over the last 50 years.

Drug discovery and development costs are high.

Last month, Forbes calculated the average cost to develop a new drug.1 Not surprisingly, drug development costs are astronomically high.

  • A smaller company with hopes of getting a single drug to market will likely spend on the low end, with a cost of $350 million.
  • Larger companies with the expectation of bringing several drugs to market can spend $5 billion per new medicine.

In general, larger companies spend more per drug developed than smaller companies. This is likely due to the cost of failures and post-market support that are part of larger company’s expenses. Since over 95% of drugs fail as they progress through development, the risk and cost associated with drug development is high. Indeed, the true cost of drug development is often debated.

There is strong consensus that drug development needs an overhaul to reduce cost. Investors, scientists, physicians, and even the NIH know that the pharmaceutical industry needs a new approach. We need to streamline the drug development process, reduce the high risk of failure, and increase the time to return on investment. While we know change needs to happen, it is difficult to change a process that takes decades of discovery and development. There are some approaches that seem to be successful. Modeling future drug development plans on the most cost and time effective successes of the past may help.

A promising new advance is the role that the public and non-profit organizations are taking in directing advances in healthcare and reducing drug development costs. The Bill and Melinda Gates Foundation has been a powerful force in providing funds and directing research toward the unmet need for vaccines around the world. The Michael J. Fox Foundation and other non-profit organizations have created research consortiums where researchers share data and resources, discuss progress, and heavily collaborate. Interestingly, MJFF focuses on funding early discovery with the intention of “de-risking” early discovery to encourage drug development. Even the NIH has made serious changes through the formation of The National Center for Advancing Translational Sciences (NCATS), where heavy collaboration, outsourcing and data sharing are a priority to assist innovation and progress in drug development.

The pharmaceutical industry has changed our world. We have amazing antibiotics and cures for several types of cancer. In order to nurture future innovation, drug development costs must be reduced.