DOI: 10.1002/mde.1360. The cost of biopharmaceutical R&D: is biotech different?

The cost of biopharmaceutical R&D: is biotech different?

10.1002/mde.1360

Crossref journal-article

Wiley

Managerial and Decision Economics (311)

Abstract

AbstractThe costs of developing the types of new drugs that have been pursued by traditional pharmaceutical firms have been estimated in a number of studies. However, similar analyses have not been published on the costs of developing the types of molecules on which biotech firms have focused. This study represents a first attempt to get a sense for the magnitude of the R&D costs associated with the discovery and development of new therapeutic biopharmaceuticals (specifically, recombinant proteins and monoclonal antibodies [mAbs]).We utilize drug‐specific data on cash outlays, development times, and success in obtaining regulatory marketing approval to estimate the average pre‐tax R&D resource cost for biopharmaceuticals up to the point of initial US marketing approval (in year 2005 dollars). We found average out‐of‐pocket (cash outlay) cost estimates per approved biopharmaceutical of $198 million, $361 million, and $559 million for the preclinical period, the clinical period, and in total, respectively. Including the time costs associated with biopharmaceutical R&D, we found average capitalized cost estimates per approved biopharmaceutical of $615 million, $626 million, and $1241 million for the preclinical period, the clinical period, and in total, respectively. Adjusting previously published estimates of R&D costs for traditional pharmaceutical firms by using past growth rates for pharmaceutical company costs to correspond to the more recent period to which our biopharmaceutical data apply, we found that total out‐of‐pocket cost per approved biopharmaceutical was somewhat lower than for the pharmaceutical company data ($559 million vs $672 million). However, estimated total capitalized cost per approved new molecule was nearly the same for biopharmaceuticals as for the adjusted pharmaceutical company data ($1241 million versus $1318 million). The results should be viewed with some caution for now given a limited number of biopharmaceutical molecules with data on cash outlays, different therapeutic class distributions for biopharmaceuticals and for pharmaceutical company drugs, and uncertainty about whether recent growth rates in pharmaceutical company costs are different from immediate past growth rates. Copyright © 2007 John Wiley & Sons, Ltd.

Bibliography

DiMasi, J. A., & Grabowski, H. G. (2007). The cost of biopharmaceutical R&D: is biotech different? Managerial and Decision Economics, 28(4â5), 469â479. Portico.

Authors 2

Joseph A. DiMasi (first)
Henry G. Grabowski (additional)

References 16 Referenced 375

{'key': 'e_1_2_1_2_1', 'volume-title': 'Principles of Corporate Finance', 'author': 'Brealy RA', 'year': '2000'} / Principles of Corporate Finance by Brealy RA (2000)
10.1016/0009-9236(95)90066-7
10.1067/mcp.2001.115446
10.1177/009286150403800301
{'issue': '3', 'key': 'e_1_2_1_6_1', 'first-page': '141', 'article-title': 'The price of innovation: new estimates of drug development costs', 'volume': '22', 'author': 'DiMasi JA', 'year': '2003', 'journal-title': 'Journal of Health Economics'} / Journal of Health Economics / The price of innovation: new estimates of drug development costs by DiMasi JA (2003)
10.1016/0167-6296(91)90001-4
Food and Drug Administration. 2004. Challenge and Opportunity on the Critical Path to New Medical Products. Available at:http://www.fda.gov/oc/initiatives/criticalpath/whitepaper.pdf[accessed 21 February2006]
10.1016/S0009-9236(96)90209-X
GottschalkAHB.2004.Improving the efficiency of the later Stages of the Drug Development Process: Survey Results from the Industry Academia and the FDA. Dissertation for Master of Science in Health Sciences and Technology Massachusetts Institute of Technology.
10.2165/00019053-200220003-00002
10.1038/nbt0905-1073
10.2144/03351dd01 / BioTechniques / Clinical development of therapeutic recombinant proteins by Reichert JM (2003)
{'key': 'e_1_2_1_14_1', 'volume-title': 'MIT Program on the Pharmaceutical Industry', 'author': 'Myers SC', 'year': '1997'} / MIT Program on the Pharmaceutical Industry by Myers SC (1997)
{'key': 'e_1_2_1_15_1', 'volume-title': 'Competitive Strategies in the Pharmaceutical Industry', 'author': 'Myers SC', 'year': '1995'} / Competitive Strategies in the Pharmaceutical Industry by Myers SC (1995)
10.1002/nav.3800130106
{'key': 'e_1_2_1_17_1', 'volume-title': 'Pharmaceutical R&D: Costs, Risks and Rewards', 'author': 'United States Congress, Office of Technology Assessment', 'year': '1993'} / Pharmaceutical R&D: Costs, Risks and Rewards by United States Congress, Office of Technology Assessment (1993)

Dates

Type	When
Created	18 years ago (Aug. 17, 2007, 11:46 a.m.)
Deposited	2 years ago (Aug. 31, 2023, 1:29 p.m.)
Indexed	1 day, 3 hours ago (Sept. 4, 2025, 9:23 a.m.)
Issued	18 years, 3 months ago (June 1, 2007)
Published	18 years, 3 months ago (June 1, 2007)
Published Online	18 years ago (Aug. 17, 2007)
Published Print	18 years, 3 months ago (June 1, 2007)

Funders 0

None

BibTeX

@article{DiMasi_2007, title={The cost of biopharmaceutical R&D: is biotech different?}, volume={28}, ISSN={1099-1468}, url={http://dx.doi.org/10.1002/mde.1360}, DOI={10.1002/mde.1360}, number={4–5}, journal={Managerial and Decision Economics}, publisher={Wiley}, author={DiMasi, Joseph A. and Grabowski, Henry G.}, year={2007}, month=jun, pages={469–479} }

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