NCPA - National Center for Policy Analysis

Pharmaceutical Companies Use Private Sector For Drug Trials

June 29, 2000

Before a drug is approved for the market, the Food and Drug Administration (FDA) requires pharmaceutical companies to prove their drug is safe and effective. Proving these facts is an expensive and time consuming process, usually involving clinical trials lasting many years and usually financed by the pharmaceutical companies themselves.

  • The average cost of developing one new drug is estimated to be between $300 million and $600 million.
  • Of the $6 billion spent by pharmaceutical companies for clinical trials each year, $3.3 billion goes for trials in the U. S.
  • For each day of delay in getting FDA approval, a pharmaceutical company loses an average of $1.3 million.

In 1991, 80 percent of clinical trial funding went to academic institutions. But companies began to get frustrated by the bureaucracy of these institutions, the delays in beginning and completing the trials and the slow progress once trials began. Because delay is costly, the companies began to look to community physicians and contract-research organizations to conduct the clinical trials. By 1998, only 40 percent of the clinical trials were conducted by academic institutions.

Source: Thomas Bodenheimer, "Uneasy Alliance: Clinical Investigators and the Pharmaceutical Industry," New England Journal of Medicine, May 18, 2000.


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