Cost of Discovery

Well, that's about as hard of a question to answer as how expensive do prescription drugs need to be to fund innovative research.

There are several estimates on how much it costs to bring a drug to market. The most frequently cited figure comes from a study from the Tufts Center of Drug Development Research. The study calculated the full cost of development per approved drug considering both costs of failure and the opportunity cost of the R&D investment. Their conclusion: a pre-tax capitalized cost per approval of $2.6 billion dollars.

However, a 2017 JAMA study found that the cost to develop a new cancer drug is closer to $648 million, a much lower figure. The analysis included 10 drugs, approved between 2006 and 2015, representing 15% of all cancer approvals over the period. The study found drugmakers spent between $157.3 million to $1.95 billion to get a cancer drug approved, with the median cost at $648 million.

Keep in mind, the study focused only on cancer drugs, and estimates may vary across fields of medicine.

The greatest difficulty in justifying R&D expenditures is perhaps the lack of consensus on what these expenses entail. While not conclusive, the analysis sets up a counter-point to the industry's battle-cry on high drug prices.