NCPA - National Center for Policy Analysis

Inventing New Drugs Is Costly, but Not Inventing Them is Costlier

April 22, 2015

There is a financial cost to developing new drugs—and it's a big one.  There is also a big cost to not developing new drugs, and that cost can be both financial and human.  People may be able to live with the pain that an undiscovered drug might have alleviated, but they may not be able to do all the things they would have.  A cancer patient might still have a few productive years after a diagnosis, but how much would it be worth to the patient—and to society (think Steve Jobs)—if a new drug meant that extended life could be indefinite?

Those costs may include:

  • The total cost to develop and gain marketing approval for a new drug is an estimated $2.6 billion.
  • It can take 10 to 12 years for that new drug to get through the Food and Drug Administration's (FDA) approval process and hit the market.
  • Once the drug has made it to market, there is often post-approval research and tests to evaluate dosing strength and a host of other factors.  DiMasi et al estimate those efforts can add an extra $312 million to the cost of a drug, for a grand total of $2.87 billion (in 2013 dollars).

The good news is that drug companies are proceeding with their research to create new and innovative drugs; the bad news is that it costs a lot to do that—however you calculate the costs.  But the public won't get more innovative drugs by imposing price controls, which is one of the critics' primary solutions to the high cost of drugs.

If the cost of creating new drugs is high, the cost of not having any new drugs is immeasurable.

Source: Merrill Matthews, "The High Cost of Inventing New Drugs — And of Not Inventing Them," Institute for Policy Innovation, April 2015. 


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