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Pharma R&D costs up tenfold since 1970s

Average cost to bring a drug to market now $1.9bn, according to the Office for Health Economics

R&D Cost of a New Medicine

The cost to research a new medicine during the past decade was ten times as much as the equivalent cost during the 1970s, according to a new report.

The R&D Cost of a New Medicine, published by UK think thank the Office for Health Economics (OHE), said the average cost to develop a new drug during the 2000s was £1.2bn ($1.9bn) compared to £125m ($199m) three decades previously.

There were several factors at play in these escalating costs, according to the OHE, including increased drug development times due to both extensive regulation ahead of drug approvals and a need to study more complex science.

Citing the paper 'How to improve R&D productivity: the pharmaceutical industry's grand challenge' from former president of Lilly Research Laboratories Steven Paul et al, the OHE said such changes in the pharma environment had meant the time require to research and gain approval for a drug increase from six years in the 1970s to 13.5 years in the 2000s.

Further factors in driving up research spending have been changing regulatory attitudes and the difficulty of tackling certain disease areas, such as Alzheimer's, oncology and arthritis and consequently success rates have fallen.

“Regulators are becoming more risk averse and may be more reluctant to approve new drugs,” said the report, while clinical endpoints for drugs to treat more complex diseases may be “less clear cut.”

In addition, 'out-of-pocket' expenses have contributed to the growth of R&D spend, with clinical trials becoming increasingly complex. However, both the use of clinical research organisations (CROs) and moving trials to emerging markets were noted as ways to keep control these costs.

On top of all these factors though was a rise in the cost of capital, which grew from 8 per cent in the 1070s to 11 per cent in the 2000s. According to the OHE, “it costs more to provide an acceptable return to investors that compensates for the high risks of investing in R&D for new drugs”.

Some pharma companies are finding a way to address these rising costs, said the OHE, with decisions being made earlier in the R&D process regarding the commercialisation prospects of a product in development.

Collaborations with public organisations that share both the risk and rewards of development were also noted by the OHE as a way companies are addressing such challenges.

This includes Sanofi's tuberculosis collaboration with the TB Alliance, while AstraZeneca's MedImmune unit recently entered an alliance with several global cancer institutes.

Pharma companies are also increasingly working with each other to share knowledge, including the TransCelerate BioPharma initiative involving ten of the largest firms from the US and Europe.

This has already led to Johnson & Johnson, Merck & Co and Eli Lilly announcing they intend to establish a clinical database to serve as a repository of information on clinical trials sites' capabilities, including Good Clinical Practice (GCP) training records.

3rd December 2012

From: Research, Regulatory

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