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Spending on New Drug Development

19 Pages Posted: 15 Dec 2005 Last revised: 8 Feb 2014

Christopher Adams

Federal Trade Commission - Bureau of Economics

Van V. Brantner

Federal Trade Commission - Bureau of Economics

Date Written: March 14, 2008

Abstract

This paper replicates DiMasi et al (2003, 2004) estimates of expenditure on new drug development using publicly available data. The paper estimates that average expenditure on drugs in human clinical trials is around $27m per year, with $17m per year on drugs in Phase I, $34m on drugs in Phase II and $27m per year on drugs in Phase III of the human clinical trials. The paper's estimated expenditure on new drug development is somewhat greater than suggested by the survey results presented in DiMasi et al (2003, 2004). The paper combines a twelve year panel of research and development expenditure for 183 publicly traded firms in the pharmaceutical industry with panel of drugs in human clinical trials for each firm over the same period. The paper estimates drug expenditure by estimating the relationship between research and development expenditure and the number of drugs in development for 1,682 company/years (183 firms multiplied by the number of years for which we have financial and drug development information). The paper also estimates expenditure on drugs in various therapeutic categories. The paper confirms earlier work by the authors that $802m may under estimate the average amount needed to bring a new molecular entity to market. It also confirms that there is significant variation in spending by therapeutic category.

Keywords: Pharmaceuticals, Drug Development Cost

Suggested Citation

Adams, Christopher and Brantner, Van V., Spending on New Drug Development (March 14, 2008). Available at SSRN: https://ssrn.com/abstract=869765 or http://dx.doi.org/10.2139/ssrn.869765

Christopher Adams (Contact Author)

Federal Trade Commission - Bureau of Economics ( email )

601 Pennsylvania Avenue, NW
Rm. 4210
Washington, DC 20580
United States
202-326-2592 (Phone)
202-326-3443 (Fax)

Van V. Brantner

Federal Trade Commission - Bureau of Economics ( email )

601 Pennsylvania Avenue, NW
Washington, DC 20580
United States
202-326-2947 (Phone)

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