Henry G. Grabowski

The price of innovation: new estimates of drug development costs

The research and development costs of 68 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per new drug is 403 million US dollars (2000 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 11% yields a total pre-approval cost estimate of 802 million US dollars (2000 dollars). When compared to the results of an earlier study with a similar methodology, total capitalized costs were shown to have increased at an annual rate of 7.4% above general price inflation.

Cost of innovation in the pharmaceutical industry

The research and development costs of 93 randomly selected new chemical entities (NCEs) were obtained from a survey of 12 U.S.-owned pharmaceutical firms. These data were used to estimate the pre-tax average cost of new drug development. The costs of abandoned NCEs were linked to the costs of NCEs that obtained marketing approval. For base case parameter values, the estimated out-of-pocket cost per approved NCE is

Brand Loyalty, Entry, and Price Competition in Pharmaceuticals after the 1984 Drug Act

114 million (1987 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a 9% discount rate yielded an average cost estimate of

Innovation in the pharmaceutical industry: New estimates of R&D costs

231 million (1987 dollars).

Economics of New Oncology Drug Development

IN 1984, Congress enacted a new law that greatly affected the economics of the pharmaceutical industry in the United States. It has been characterized as the most important legislation affecting competition in the pharmaceutical industry since the 1962 Kefauver-Harris Amendments to the Food and Drug Act. This 1984 law, known as the Drug Price Competition and Patent Term Restoration Act (hereinafter the 1984 Act), facilitated the entry of generic drug products after patent expiration while it also restored part of the patent life lost during the premarket regulatory process for new introductions.1 Market entry by generics was relatively limited prior to 1984 because of costly Food and Drug Administration (FDA) requirements that had to be met by the imitative products. That is, generic drugs often would have to duplicate many of the pioneers tests to gain market approval after patent expiration. As a result of the 1984 law, generic products need only demonstrate bioequivalence to the pioneers brand, and generic entry has increased significantly. This has provided a body of very interesting data to analyze the pattern of entry and the pricing strategies followed by the entrants and incumbents. In this article, we make use of data covering the sales and prices of the pioneer and generic products for eighteen drug products, generally over the time period 1984-88. A number of issues are examined. First,

The Determinants of Industrial Research and Development: A Study of the Chemical, Drug, and Petroleum Industries

The research and development costs of 106 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug and biologics development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per approved new compound is

Returns on research and development for 1990s new drug introductions.

1395 million (2013 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 10.5% yields a total pre-approval cost estimate of

Returns to R&D on new drug introductions in the 1980s.

2558 million (2013 dollars). When compared to the results of the previous study in this series, total capitalized costs were shown to have increased at an annual rate of 8.5% above general price inflation. Adding an estimate of post-approval R&D costs increases the cost estimate to

Longer Patents for Increased Generic Competition in the US The Waxman-Hatch Act after One Decade

2870 million (2013 dollars).

Estimating the Effects of Regulation on Innovation: An International Comparative Analysis of the Pharmaceutical Industry

PURPOSE Review existing studies and provide new results on the development, regulatory, and market aspects of new oncology drug development. METHODS We utilized data from the US Food and Drug Administration (FDA), company surveys, and publicly available commercial business intelligence databases on new oncology drugs approved in the United States and on investigational oncology drugs to estimate average development and regulatory approval times, clinical approval success rates, first-in-class status, and global market diffusion. RESULTS We found that approved new oncology drugs to have a disproportionately high share of FDA priority review ratings, of orphan drug designations at approval, and of drugs that were granted inclusion in at least one of the FDAs expedited access programs. US regulatory approval times were shorter, on average, for oncology drugs (0.5 years), but US clinical development times were longer on average (1.5 years). Clinical approval success rates were similar for oncology and other drugs, but proportionately more of the oncology failures reached expensive late-stage clinical testing before being abandoned. In relation to other drugs, new oncology drug approvals were more often first-in-class and diffused more widely across important international markets. CONCLUSION The market success of oncology drugs has induced a substantial amount of investment in oncology drug development in the last decade or so. However, given the great need for further progress, the extent to which efforts to develop new oncology drugs will grow depends on future public-sector investment in basic research, developments in translational medicine, and regulatory reforms that advance drug-development science.