How much do you think it costs to develop a drug, on average? Just take a guess.
A) $50 million
B) $250 million
C) $1 billion
D) $2.5 billion
E) $5 billion.
Well, the Tufts Centre for the Study of Drug Development calculated a cost of about $2.87 Billion in 2016! Of course, the actual costs depends on many factors. That’s what this chapter explores.
Now that you understand the process of how a new drug moves from idea to product, we’d like to deepen your understanding of the players involved and how the process is typically funded. As you know, only about 1% of the drugs that begin the development process make it to the market. Each attempt is remarkably expensive. So who pays for these attempts and why are they incentivized to do so?
In this 2-minute video, the analogy of a mountain climbing expedition is used to illustrate the reason why, even in spite of seemingly extravagant list prices, most drug companies are lucky to earn a 10% profit.
In this chapter, we’ll explore where the money to make these long and risky climbs comes from.
(Spoiler alert: It’s not the government!)