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J Health Econ. 2003 Mar;22(2):151-85.

The price of innovation: new estimates of drug development costs.

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  • 1Tufts Center for the Study of Drug Development, Tufts University, 192 South Street, Suite 550, Boston, MA 02111, USA. joseph.dimasi@tufts.edu

Abstract

The research and development costs of 68 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per new drug is 403 million US dollars (2000 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 11% yields a total pre-approval cost estimate of 802 million US dollars (2000 dollars). When compared to the results of an earlier study with a similar methodology, total capitalized costs were shown to have increased at an annual rate of 7.4% above general price inflation.

Copyright 2003 Elsevier Science B.V.

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PMID:
12606142
[PubMed - indexed for MEDLINE]
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