5 ms·

You're severely underestimating how expensive drug research is. It costs nearly 3 billion dollars to get a drug from zero to market-ready according to the TCSDD

You're severely underestimating how expensive drug research is. It costs nearly 3 billion dollars to get a drug from zero to market-ready according to the TCSDD.

mikro2nd 8y ago
How much of that 3billion goes to the fundamental research vs. the amount needed for regulatory approvals, though? (On average -- obviously it will vary quite widely from one drug to the next and will depend on many factors.)
- gomox 8y ago
  The expensive bit are the clinical trials. They are required for approval, but they are research.
gomox 8y ago
This often quoted number includes the investments in failed drugs (an outstanding majority) and 1.5B of an 11% cost of capital "opportunity cost" (i.e. money not gained by investing in other stuff). It is therefore highly misleading when quoted out of context, as it is not the real amount of money that is spent on a single drug.
- refurb 8y ago
  Huh? Those two things certainly do represent real costs. If a company spends $2B to develop 5 candidate drugs and four fail, the cost was $2B for that drug. Learning what doesn’t work helps you find something that does. Second, opportunity costs are real costs, even though most consumers ignore them. You see this when buying a home. People never count the money they could have made by putting their down payment into the market, but that’s still money lost. You can argue 11% is too high, but that’s a different argument.
  - gomox 8y ago
    I understand the numbers, but they are highly misleading, which is my point. When you say it costs $X to do $Y, including in $X the cost of 20 other times you fail to do some other thing that isn't $Y is unexpected. Likewise re: opportunity costs. The actual investment doesn't include the opportunity cost. I.e. only around half of that money had to be obtained. The numbers are meaningful from the capital allocator perspective, which is not the conventional perspective. The number that people picture when you say "the cost of bringing a drug to market" is ballpark 100-200M.
    - rebuilder 8y ago
      The conventional perspective seems misleading, then. Saying you can bring a drug to market for a price that doesn't include the costs of failure in finding out how to make the drug in the first place completely distorts the matter, IMO. Maybe I'm not getting what you think the benefits of not counting research costs across the board are.
      - newtonic 8y ago
        Pharmaceutical development is really just throwing mud at a wall and seeing what sticks. Sometimes, something sticks and you get rich, sometimes it doesn't and you get nothing. If during one of those failed attempts you came across something useful but not lucrative, I think the cost of bringing it to market should start at that point, and should not include all the trials when you were looking for the cash cow that you had to do anyway. shrug
denzil_correa 8y ago
The date in TCSDD is self-reported by pharma companies. Besides, the data is neither publicly available nor are their methods transparent [0]. A recent peer reviewed study estimates the average cost of a cancer drug at $648M with revenue after approval being $1658.4M [1]. [0] https://www.nytimes.com/2014/11/19/upshot/calculating-the-real-costs-of-developing-a-new-drug.html https://www.nytimes.com/2014/11/19/upshot/calculating-the-re... [1] https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2653012 https://jamanetwork.com/journals/jamainternalmedicine/fullar...

You're severely underestimating how expensive drug research is. It costs nearly 3 billion dollars to get a drug from zero to market-ready according to the TCSDD.

mikro2nd 8y ago

How much of that 3billion goes to the fundamental research vs. the amount needed for regulatory approvals, though? (On average -- obviously it will vary quite widely from one drug to the next and will depend on many factors.)

gomox 8y ago
The expensive bit are the clinical trials. They are required for approval, but they are research.

gomox 8y ago

This often quoted number includes the investments in failed drugs (an outstanding majority) and 1.5B of an 11% cost of capital "opportunity cost" (i.e. money not gained by investing in other stuff). It is therefore highly misleading when quoted out of context, as it is not the real amount of money that is spent on a single drug.

refurb 8y ago
Huh? Those two things certainly do represent real costs. If a company spends $2B to develop 5 candidate drugs and four fail, the cost was $2B for that drug. Learning what doesn’t work helps you find something that does. Second, opportunity costs are real costs, even though most consumers ignore them. You see this when buying a home. People never count the money they could have made by putting their down payment into the market, but that’s still money lost. You can argue 11% is too high, but that’s a different argument.
- gomox 8y ago
  I understand the numbers, but they are highly misleading, which is my point. When you say it costs $X to do $Y, including in $X the cost of 20 other times you fail to do some other thing that isn't $Y is unexpected. Likewise re: opportunity costs. The actual investment doesn't include the opportunity cost. I.e. only around half of that money had to be obtained. The numbers are meaningful from the capital allocator perspective, which is not the conventional perspective. The number that people picture when you say "the cost of bringing a drug to market" is ballpark 100-200M.
  - rebuilder 8y ago
    The conventional perspective seems misleading, then. Saying you can bring a drug to market for a price that doesn't include the costs of failure in finding out how to make the drug in the first place completely distorts the matter, IMO. Maybe I'm not getting what you think the benefits of not counting research costs across the board are.
    - newtonic 8y ago
      Pharmaceutical development is really just throwing mud at a wall and seeing what sticks. Sometimes, something sticks and you get rich, sometimes it doesn't and you get nothing. If during one of those failed attempts you came across something useful but not lucrative, I think the cost of bringing it to market should start at that point, and should not include all the trials when you were looking for the cash cow that you had to do anyway. shrug

denzil_correa 8y ago

The date in TCSDD is self-reported by pharma companies. Besides, the data is neither publicly available nor are their methods transparent [0]. A recent peer reviewed study estimates the average cost of a cancer drug at $648M with revenue after approval being $1658.4M [1]. [0] https://www.nytimes.com/2014/11/19/upshot/calculating-the-real-costs-of-developing-a-new-drug.html https://www.nytimes.com/2014/11/19/upshot/calculating-the-re... [1] https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2653012 https://jamanetwork.com/journals/jamainternalmedicine/fullar...