Pharmaceuticals: The price of failure

IN THE pharmaceuticals business there are few issues more loaded than the cost of developing a new drug. For a number of years estimates from industry groups on either side of the Atlantic have put it at $1.2 billion-1.8 billion. A new study by the Centre for the Study of Drug Development at Tufts University in Massachusetts reckons the average cost for drugs developed between 1995 and 2007 was $2.6 billion. Among those rejecting this new figure as highly misleading are Médecins Sans Frontières, a charity, and the Union for Affordable Cancer Treatment, a patients’ group.The main point of controversy over such estimates is that they roll in the costs of those drugs that failed to win approval and, for good measure, the cost of capital required for the R&D. Tufts’s estimate includes $1.2 billion for the return on capital forgone while a drug is in development, on the assumption it would have otherwise earned a generous 10.5% a year. The remaining $1.4 billion is the average R&D cost of a random selection of drugs, multiplied by risk factors that account for the chances of failure at each stage.Successful drugs cost far less than even the lower, $1.4…

Link to article: www.economist.com/news/business/21635005-startling-new-cost-estimate-new-medicines-met-scepticism-price-failure?fsrc=rss%7Cbus

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