Tufts Study Estimates Bio-Drug Development at $1.2B

The Tufts Center for the Study of Drug Development estimates the average cost of developing a new biotechnology product to be $1.2 billion, which reflects the costs of drugs that fail in testing and the time costs associated with bringing a new biopharmaceutical to market. Of this amount, out-of-pocket preclinical cost totaled $615 million, while similar clinical period cost totaled $626 million.

According to the Tufts CSDD analysis, clinical development and regulatory review for a new biopharmaceutical product took 97.7 months on average, about 8% longer than for pharmaceuticals.

“While biotech offers significant promise in treating entire categories of diseases for which no medicines previously existed, it comes at a significant cost,” said Tufts CSDD director of economic analysis, Joseph A. DiMasi.

Tufts CSDD estimates are based on compound-specific costs for a sample of 17 investigational biopharmaceuticals from four firms that first entered clinical testing from 1990 to 2003. Average development times and phase transition probabilities were estimated based on data from more than 500 therapeutic recombinant proteins and mAbs. The full R&D cost estimate was based on a clinical approval success rate (defined as obtaining U.S. regulatory approval for marketing) of 30.2% for biopharmaceuticals.

Additional study findings put the cost per approved biopharmaceutical for the preclinical period at $198 million. When capitalized, this estimate is $615 million per biopharmaceutical. Average clinical period cost per approved biopharmaceutical was $361 million. When capitalized, this estimate is $626 million. Capitalization increases biopharmaceutical costs relative to traditional pharma costs due to longer development timelines and a higher cost of capital. Also, biopharmaceuticals had an overall clinical approval success rate of 30.2% vs. 21.5% for traditional pharma firm pipelines.