The Cost of Bringing a Drug to Market


Anyone that watches television in North America is familiar with advertisements for new prescription drugs promising to help with a range of ailments, from restless leg syndrome to irritable bowel syndrome. Behind the commercials and the fancy roll-outs for new drugs, there’s an intense process that likely took years of development in order to present that drug to consumers. What is the true cost and process of bringing a new drug to the market?

Process of Developing New Drugs

From discovery to market, the process of developing a new pharmaceutical is a lengthy procedure. According to Wex Pharmaceuticals Inc., the process can take anywhere from 10 to 15 years from the discovery phase to approval for the distribution of a new drug. In total, there are roughly nine steps recognized by most companies to complete the process:

  1. Discovery Stage: Dominated by laboratory work and testing, this may take several years to find a suitable drug through the identification of compounds that properly target molecules or processes of a certain disease.
  2. Preclinical Testing: An appropriate animal model is used for initial testing regarding the safety and effectiveness of a drug.
  3. Investigational New Drug Application: In the IND step in the United States, the FDA gets involved by requiring pharmaceutical companies to submit an application to proceed to human trials.
  4. Clinical Trials: Human volunteers seeks to prove the validity and effectiveness of a drug in treating human patients.
    • Phase I Studies: The first step in clinical trials involves healthy volunteers and lasts one year. This often tests for metabolic and pharmacological reactions in humans, as well as possible side effects.
    • Phase II Studies: Lasting one to three years, this second step seeks to identify effective dosages and dosage frequency.
    • Phase III Studies: The third phases involves a large number of human volunteers and looks again at possible side effects.
    • Phase IV Studies: The final phase focuses on gaining experience monitoring the safety of the drug in large numbers of patients, as would be the case if the drug were currently available.

The final phase is the New Drug Application phase in which the FDA or responsible governmental agency must provide approval. All steps between the start of Clinical Trials and the NDA step require the filing of a new IND with the FDA.

The Cost of Developing New Drugs

Given the immense amount of time spent researching new drugs, plus supplies, equipment, and facility costs, it shouldn’t come as a surprise that it can cost a lot of money for pharmaceutical companies to develop new, safe, and effective drugs. Just how much does it cost?

Well, Forbes reports that the average new drug costs the company anywhere between $4 billion and $11 billion to develop over the course of at least a decade of work. Pharmaceutical companies have used this staggering number as a primary means of justifying the cost of prescription medications for the public, but why does it cost so much?

As alluded to earlier, there are a lot of moving parts involved in a process that can last as much as 15 years. While clinical trials, for example, can cost $100 million on their own, the primary expense in developing new drugs is actually the failure rate. If a drug fails to get to market, the company will have spent hundreds of millions, if not more, on a failed product. Not only is that money gone, the product doesn’t make it to market to try and recoup some of the losses.

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