How much does it cost to bring a pharmaceutical drug to market?

A new study in 2020 estimated that the median cost of getting a new drug into the market was $985 million, and the average cost was $1.3 billion, which was much lower compared to previous studies, which have placed the average cost of drug development as $2.8 billion.

Why is it so expensive to develop drugs and biologics?

But the primary reason biologics prices are so steep is that the manufacturers of these drugs enjoy a monopoly and are able to keep their prices very high for a very long time. The reason most pharmaceutical companies have monopolies on biologics is that these products are structurally and chemically complex.

Why is drug discovery difficult?

Drug discovery is hard because it is very rare to discover a molecule – either natural or artificial – that is a hit against a protein target implicated in a disease. Hit rates from screening even millions of molecules can be very low.

Why are new drugs so expensive?

Companies also consider the huge research and development (R&D) costs incurred to bring a drug to market, a consideration that often leads to high prices for new drugs. The news media in the U.S. has put a great deal of focus on pharmaceutical companies that have released new drugs with sky-high prices.

Does pharmaceutical research really cost so much?

So next we’ll examine the research question: does pharmaceutical research really cost so much that, even with the prices they charge, they barely have any money left over at the end of each year? A good way to find out is to look at their annual financial statements.

Where do pharmaceutical companies get their revenue from?

The majority of a pharmaceutical company’s revenue comes from steadily increasing prices of drugs that have been on the market for some time. When pricing their drugs, pharmaceutical companies consider a drug’s uniqueness, competition from other companies, and a drug’s effectiveness.

Are high drug prices justified by high research costs?

But invoking high research costs to justify high drug prices is deceptive. No matter the metric, drug prices in the United States are extreme. Many drugs cost more than $120,000 a year. A few are even closing in on $1 million.