The never-ending debate about what drugs should cost is in part driven by the fact that no one seems to know how much money it actually takes to develop one. There is a new estimated dollar amount: $2.6 billion.
The latest projection from the influential Tufts Center for the Study of Drug Development, a research group partially funded by drugmakers, is more than three times as high as the group's 2001 estimate of $802 million, and the figure is already being disputed by some in the nonprofit sector, consumer advocates and academics.
The group estimates that the average drug discovery and development process costs $1.4 billion. Its estimate includes an additional $1.2 billion in foregone returns investors would have otherwise seen while the drug was under development. The group estimates that drugmakers on average face $312 million in research and development costs after a drug is approved, which could bring the total average cost of development to $2.9 billion.
The prices of many popular prescription drugs have risen sharply in the last decade, leaving consumers wondering why the cost of medicine is so high - and whether pharmaceutical companies need to charge so much to cover the cost of developing drugs, or if the companies are padding their profits. With patents on blockbuster drugs expiring during the past few years, the pharmaceutical industry is under pressure to make up for those losses.
There have been other estimates, but the Tufts Center researchers maintain that the cost of developing a drug, when adjusted for inflation, has increased 145 percent over the past decade. Their findings - which are drawing scrutiny - attribute the rising costs to higher failure rates for drugs and higher research and development costs. Drugmakers have also been tackling more complex diseases over the past decade, and they must fund research proving the cost-effectiveness of new drugs, according to the report.
An overwhelming number of drugs that enter clinical trials don't actually get approval by the Food and Drug Administration, so drugmakers try to recover those costs when they have a successful product. Joseph DiMasi, lead author of the Tufts Center study, said the group's estimate takes that into account.
"Drug development remains a costly undertaking despite ongoing efforts across the full spectrum of pharmaceutical and biotech companies to rein in growing R&D costs," DiMasi said in a statement.
The study itself won't be released until 2015, the researchers said. So far, the Tufts Center has produced a slide presentation, a news release and a backgrounder on the study methodology.
Consumer advocates say estimates from the Tufts Center are often inflated to justify higher drug prices - and the lack of detail released on this latest study makes it hard to assess the claims.
James Love, director of the nonprofit Knowledge Ecology International, said critical information is missing from the analysis, such as how many patients were in the drug trials and how much money was claimed to have been spent on each patient.
"First impression: The study, which is part of a public relations campaign by the drug companies to justify high prices, is long on propaganda, and short of details," wrote Love in a blog post.
Doctors Without Borders was harsher in its assessment. "If you believe [the Tufts analysis], you probably also believe the earth is flat," said policy director Rohit Malpani in a statement.
In 2006, Federal Trade Commission researchers tried to replicate a Tufts study that pegged the cost of developing a drug at $802 million. The FTC researchers' findings, published in the policy journal Health Affairs, estimated that the average cost at the time was a little higher, at $868 million - but they found there was considerable variation based on drugmaker and the type of drug. For example, the analysis found that the average cost of drug development was $521 million for one large manufacturer, while it was $2.1 billion for another.
Merrill Goozner, in his book "The $800 Million Pill: The Truth Behind the Cost of New Drugs," writes that the actual development cost was about one-fifth of the last Tufts estimate, contending that most drug development relies on taxpayer-funded research. Meanwhile, a Forbes analysis last year of 100 pharmaceutical companies pegged the cost of developing a drug at $5 billion.
And so the debate over how much it costs to develop a drug - and what it should cost - goes on.