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Healthy Skepticism Library item: 20344

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

 

Publication type: Journal Article

DiMasi JA, Hansen RW, Grabowski HG.
The price of innovation: new estimates of drug development costs.
J Health Econ 2003; 22:(2):151-85
http://www.sciencedirect.com/science/article/pii/S0167629602001261


Abstract:

The research and development costs of 68 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per new drug is 403 million US dollars (2000 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 11% yields a total pre-approval cost estimate of 802 million US dollars (2000 dollars). When compared to the results of an earlier study with a similar methodology, total capitalized costs were shown to have increased at an annual rate of 7.4% above general price inflation.

Keywords:
Capital Expenditures/statistics & numerical data* Costs and Cost Analysis Data Collection Drug Approval/economics Drug Evaluation/economics* Drug Evaluation, Preclinical/economics Drug Industry/economics* Drugs, Investigational/economics Humans Inflation, Economic Organizational Innovation Research Support as Topic/economics* United States

 

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As an advertising man, I can assure you that advertising which does not work does not continue to run. If experience did not show beyond doubt that the great majority of doctors are splendidly responsive to current [prescription drug] advertising, new techniques would be devised in short order. And if, indeed, candor, accuracy, scientific completeness, and a permanent ban on cartoons came to be essential for the successful promotion of [prescription] drugs, advertising would have no choice but to comply.
- Pierre R. Garai (advertising executive) 1963