$125 MILLION QUESTION: WHAT DO DRUGS COST?

Abstract

How much do new drugs cost to develop?

Ask officials at U.S. pharmaceutical companies how much they spent taking a drug from test tube to market and they invariably will say "about $125 million." The figure's accuracy, however, is hotly disputed by regulators and industry critics.

Indeed, the amount isn't derived from direct accounting of the spending on a specific drug. Instead, it is based on an academic study, sponsored by drug makers in the late 1970s, which added up total R&D costs and divided it by the number of drugs produced. Back then, the study said the bill for a new drug was $80 million. It was updated to $125 million a few years ago by adding in inflation...

...A Food and Drug Administration official contends that half the 30 drugs for use in life-threatening illnesses approved in the 1980s were first discovered abroad, and that much of the testing was done by foreign companies. Moreover...much of the research for the drugs first came out of university labs partly sponsored by federal grants.