R&D Costs of New Medicines: A Landscape Analysis

Abstract

Over the years, questions have been raised over R&D costs of new medicines. The aim of this study is to conduct a landscape review of the (drivers of) R&D costs of a new medicine derived from the peer-reviewed and grey literature. Included studies have drawn data either from confidential company surveys or from publicly available company financial statements, in addition to accessing the literature and medicine information databases. Although there were differences in methodology, parameter values, samples and time periods between studies, estimates of R&D costs per new medicine (accounting for the cost of failures) ranged from US$944m to US$2,826m (adjusted to 2019 prices). The evidence also suggested that R&D costs per new medicine have increased over time. A few studies have broken down total costs and showed that clinical development accounts for 50-58% of R&D costs per new medicine. R&D costs were influenced by costs of discovery and pre-clinical development, costs of clinical development, cost of capital, company and product profile. Finally, cost estimates are likely to be dynamic as the biopharmaceutical industry and the broader environment continue to evolve.

Keywords: costs; drivers; estimates; medicines; research and development.

Figure 1

Mean capitalised R&D costs per new medicine based on company surveys (expressed in 2019 US$ millions). DiMasi and Grabowski (8) selected a sub-sample of biotechnology medicines from DiMasi et al. (1).

Figure 2

Composition of mean capitalised R&D costs per new medicine. DiMasi and Grabowski (8) selected a sub-sample of biotechnology medicines from DiMasi et al. (1).

Figure 3

Mean R&D costs per new medicine of 12 largest biopharmaceutical companies over time (expressed in 2019 US$ millions) (16).

Figure 4

Drivers of R&D costs of new medicines and how these are impacted.