What Does it Cost to Develop a Pharmaceutical Drug?

Jul 14, 2021

Drug development of a novel compound or derivative is not cheap or for the fainthearted. Companies can spend hundreds of millions of dollars and years only to develop a molecule that poses unpalatable health risks or is not efficacious. To a considerable extent, the existing regulatory and reimbursement framework is to blame. Time, risk preemption, and scientific rigor come with a hefty price tag.

Previous research has estimated the cost to develop a new drug can range from $314 million to $2.8 billion.

A recent 2020 JAMA study takes a closer look at the numbers. The study included 63 of 355 new therapeutic drugs and biologic agents from 47 companies approved by the US Food and Drug Administration between 2009 and 2018. The estimated median capitalized research and development cost per product was $985 million counting expenditures on failed trials.

Data was accessible for smaller firms, products in certain therapeutic areas, orphan drugs, first-in-class drugs, therapeutic agents that received accelerated approval, and products approved between 2014 and 2018. The data was collected from publicly available sources. Results varied in sensitivity analyses using different estimates of clinical trial success rates, preclinical expenditures, and cost of capital.

Is there a better way to develop winning drugs in 2021? Yes.

The herculean efforts by Pfizer, Astra Zeneca, J&J, and others to develop highly successful Covid-19 vaccines in record time demonstrates the value of innovative tools and approaches to bring winning drugs to market quickly.

Breakthrough innovations also promise to reduce the cost of drug development by saving time and relying more on existing technologies to do much of the heavy (research) lifting and minimize risks.

Eastra Health will leverage many of these innovations, and others, in our research and drug development roadmap.

Our drug development strategy includes the following elements: Designing the drug from the patient experience and physician channel. There is no point in investing in a compound, dosage, or format that the patient will not take or prescribe by the physician. Many factors can kibosh patient and physicians acceptance of a psychedelic drug including historical stigma and false information.

Use the power of computational biology (CB) – the marriage of Artificial Intelligence, advanced mathematics, and high-performance computing – to quickly crunch trillions of molecular permutations and come up with a shortlist of promising molecules. CB tools enable drug developers to accelerate baseline research while reducing labor costs and avoiding costly errors.

Leverage virtual trials. Why employ live trials when virtual ones can fully address your research objectives cheaper, faster, and targeted at specific geography. • Virtual trials are not the best research solution in every case but they can provide important research data in many cases and geographies.

Engage FDA and Health Canada early on as key ‘stakeholders’ to understand potential approval challenges and avoid costly errors. Early engagement with regulators can also help create a product solution that is as close to ‘approval ready as possible.

Mitchell Osak
CCSO