If you think things are getting more expensive, it may not be your imagination. The Tufts Center for the Study of Drug Development has announced that the average cost of developing a new biotechnology product is $1.2 billion (yes, that’s with a “B”).

Tufts study said the $1.2 billion estimate reflects the costs of drugs that fail in testing and the time costs associated with bringing a new biopharmaceutical to market. Of this amount, capitalized out-of-pocket preclinical cost totaled $615 million, while similar clinical period cost totaled $626 million. A new biotech product took 97.7 months on average to wend its way through clinical development and regulatory review, about eight percent longer than for pharmaceuticals, according to the Tufts CSDD analysis.

Among the cost challenges faced for biotech drugs are safety concerns, which have made regulators more cautious about the drugs they approve. According to study, only 58 new drugs in 2002-04 received marketing approval from the U.S. Food and Drug Administration (FDA), a 47% drop from the peak of 110 new drugs in the 1996-98 period.

Interestingly, the study found that drug sponsors who make more extensive use of Contract Research Organizations (CROs) tend to complete projects faster, while maintaining quality comparable to submissions involving minimal use of CROs. In addition, projects involving high CRO usage typically are submitted more than 30 days closer to the projected FDA submission date than low CRO usage projects. Tufts CSDD estimates that $5.5 billion, or 15%, of global drug development spending, excluding pass-through fees (e.g., central lab costs and investigator grants), went to contract clinical services in 2004. This compares to 12% in 2001.

Closely tied to the cost estimates is a study showing that the cost per patient of running Phase 3 clinical studies of new pharmaceuticals now exceeds $26,000, on average according to a report “Clinical Operations: Accelerating Trials, Allocating Resources and Measuring Performance”, published by Cutting Edge Information. The survey data reveal that Phase 3 studies are the most costly as measured on a per-patient basis. Phase 2 trials are comparatively cheaper, with the average per-patient cost at just over $19,300 per patient. Phase 1 trials, which test drugs’ safety on a smaller number of patients, are even less expensive at about $15,700 per patient.

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