Developing a New Cancer Drug Costs 1.2 Billion Dollars!

Developing a new drug for the US market is estimated to cost an average of 879.3 million dollars when failures and the cost of capital are included. These findings came from a study led by Turkish researcher Dr. Aylin Sertkaya, published in JAMA Network Open on 28 June 2024.

Key Findings

Average Development Cost

The average cost of developing a new drug was estimated at approximately 172.7 million dollars, including postmarketing studies.

Cost Including Failures

Including failures raised the expected average cost to 515.8 million dollars.

Cost of Capital

The expected average capital cost was calculated at 879.3 million dollars.

Oncology Costs

• Average Development Cost: developing a new oncology drug cost an average of 84.7 million dollars.
• Cost Including Failures: accounting for failures raised the expected average to 595.5 million dollars.
• Cost of Capital: the expected average capital cost was calculated at 1.2 billion dollars.

How Does a Cancer Drug Get Approved?

Developing a cancer drug is a lengthy, expensive journey. Each step carefully assesses potential benefits and risks to provide safe, effective treatment. Some brief, anecdotal information about this process follows:

• How Long Does It Take? From discovery to FDA approval, cancer drug development usually takes 7 to 15 years, encompassing discovery, preclinical studies, clinical trials, and finally approval.
• Success Rates in the Approval Process: FDA approval rates for cancer drugs are low. Approximately 5-7% of drugs entering clinical trials receive approval. This reflects the challenges of cancer research and the need to demonstrate safety and effectiveness.

• Expedited Approval Pathways: The FDA offers several programs to speed up treatments, particularly for serious or life-threatening diseases. Programs such as Breakthrough Therapy Designation and Accelerated Approval allow faster evaluation of drugs meeting particular criteria. Follow-up studies are nevertheless required after marketing to monitor effectiveness and safety.
• Clinical Trials and Efficacy Measures: Overall survival rates or disease-free survival are commonly used to assess cancer drug effectiveness. In some cases, surrogate measures such as tumor shrinkage allow potential benefits to be assessed earlier.

These observations highlight both the challenges of cancer drug development and why the process requires rigor. The development and evaluation challenges encountered as every new drug passes through approval offer important learning opportunities for healthcare professionals, researchers, and patients.

Changes in R&D Intensity

Between 2008-2019, pharmaceutical industry sales fell by 15.6% while R&D intensity increased from 11.9% to 17.7%.

Large pharmaceutical companies increased R&D intensity from 16.6% to 19.3%, with sales rising by 10% (from 380 billion to 418.0 billion dollars).

Meanwhile, drug development costs may have remained relatively stable or declined.

The Researchers’ Commentary

The researchers summarized their findings: “These results show that understanding the scale of drug development costs and their associated factors is important for designing pharmaceutical policies and assessing their possible effects on innovation and competition.”

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Who Is Dr. Aylin Sertkaya?

Dr. Aylin Sertkaya is a senior economist and vice president at Eastern Research Group, Inc. (ERG), in Lexington, Massachusetts. Throughout her career, she has designed and conducted economic and policy analyses supporting federal and state public policy initiatives. She has assembled and led teams of economists, statisticians, scientists, and nationally recognized experts to support high-profile initiatives. Her work has appeared in peer-reviewed journals including JAMA Network Open, American Journal of Infection Control, Human and Ecological Risk Assessment, Applied Health Economics and Health Policy, and Clinical Trials.

She received an FDA Recognition Award for work on effective quality systems and risk management under the agency’s 21st Century cGMP (current Good Manufacturing Practices) initiative. Her roles include chairing the Economic and Benefit Analysis Specialty Group and numerous sessions. She served on a National Academies of Sciences, Engineering, and Medicine committee examining the long-term US health and economic effects of antimicrobial resistance and contributed to the 2021 book “Combating Antimicrobial Resistance and Protecting the Miracle of Modern Medicine.” Dr. Sertkaya holds a doctorate in economics, undergraduate degrees in physics and economics, and a minor in mathematics.