New OHE Study on Pharmaceutical R&D Costs Released

LONDON, Dec. 3, 2012 /PRNewswire/ -- The Office of Health Economics today released a comprehensive study of the cost of R&D for new medicines. It confirms research published to date, which shows an increase in costs from £125 million ($199 million) per new medicine in the 1970s to £1.2 billion ($1.9 billion) in the 2000s (both in 2011 prices).

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Four factors are increasing R&D costs: (1) higher out-of-pocket costs, up nearly 600% from the 1970s to the 2000s; (2) lower success rates for clinical development as tougher therapeutic areas are tackled -- e.g. neurology (Alzheimer's), autoimmune diseases (arthritis), and oncology -- from 1 in 5 in the 1980s to 1 in 10 in the 2000s; (3) increases in R&D times as both regulation and science have become more complex, from 6 years in the 1970s to 13.5 years in the 2000s; and (4) increases in the cost of capital -- i.e. providing returns to funders that reflect the high risks of investing in medicines R&D, from 8% in the 1970s to 11% in the 2000s.

Companies continue to emphasise changes that are intended to improve the efficiency of R&D decisions, addressing those factors within their control. This includes, for example, making decisions far earlier in R&D about the market prospects of a drug candidate and more tightly managing clinical trial costs, often by outsourcing some aspects and/or siting some trials in lower-cost locations.

Rapidly evolving R&D technology requires a wide range of expertise and data. New collaborations are arising that involve a range of public and private entities, sharing both risks and rewards. Dr. Mestre-Ferrandiz, lead author of the study, points out that, "Just as new approaches to R&D are crucial to the future, so are new approaches to facilitating market entry and use. These are essential both to encouraging R&D and ensuring that patients have the earliest access possible to life-changing therapies."

Contact: Jorge Mestre-Ferrandiz
Email: jmestre-ferrandiz@ohe.org
Phone: +44.20.7747.8860
Materials: http://news.ohe.org/

The Office of Health Economics is a research and consulting organisation that has been providing specialised research, analysis and expertise on a range of health care and life sciences issues and topics for 50 years. Visit us on the web at www.ohe.org.