R&D costs rise ten-fold
pharmafile | December 4, 2012 | News story | Research and Development, Sales and Marketing | OHE, R&D, research and development
Research by the Office of Health Economics (OHE) think tank shows that the cost of pharma R&D has risen ten-fold in real terms over the past four decades.
Expressed in 2011 prices, the cost per new medicine has risen from £125 million in the 1970s to £1.2 billion in the 2000s.
Using published research data, the OHE report suggested that there are four main variables which dictate how expensive R&D has become.
The first of these are the so-called ‘out-of-pocket’ costs of R&D – swallowed by a company, before adjusting for drug failures – which have risen 600% from the 1970s to now.
The second problem is success rates, which have dropped from one in five in the 1980s to just one in ten in modern times – in part because more difficult diseases, such as Alzheimer’s, cancer and autoimmune conditions, are being explored.
The third issue is the fact that it now takes longer to get a drug from molecule to market: R&D time has jumped from six years in the 1970s to 13.5 years in the 2000s as both regulation and the science itself have become more complex.
And finally, the OHE finds, cost of funding has risen since investors expect greater returns now as their quid pro quo for the risks of investing in pharma R&D: these have grown from 8% in the 1970s to 11% now.
Making decisions earlier in R&D projects about the viability of drug candidates and reducing clinical trial costs by moving them to, say, China or India – or outsourcing them altogether – are strategies companies are already using to mitigate rising prices.
And the authors also see the sorts of tie-ups which have become commonplace in pharma – for example between industry and academia – helping to spread the risks and rewards of R&D, as a sensible way forward.
“Rapidly evolving R&D technology requires a wide range of expertise and data,” the report says, although it warns this is not the only element of current practice which needs to be looked at.
“Just as new approaches to R&D are crucial to the future, so are new approaches to facilitating market entry and use,” says lead author Dr Jorge Mestre-Ferrandiz.
“These are essential both to encouraging R&D and ensuring that patients have the earliest access possible to life-changing therapies,” he concluded.
The study has been seized on by the ABPI, touching as it does on the two great industry bugbears: the cost of developing medicines and the patchiness of their uptake in the NHS.
Chief executive Stephen Whitehead said: “As the cost of R&D continues to rise, the price of medicines in the UK remain amongst the lowest in Europe and companies struggle to get their medicines bought by the NHS and then used to treat patients.”
This meant it was more difficult for pharma companies to reinvest profits back into the discovery of new medicines to combat disease, he added.
Adam Hill
Related Content

PlasmidFactory founder Dr. Martin Schleef honoured with the NRW Innovation Award 2025
The founder and long-standing CEO of PlasmidFactory, Dr. Martin Schleef, was honoured in Düsseldorf with …

ANGLE’s Parsortix system used in new cancer biology research
ANGLE has announced three new peer-reviewed publications demonstrating the use of its Parsortix circulating tumour …

Moderna expands use of AI-ready R&D platform
Moderna has expanded its partnership with Benchling, a cloud-based research platform, to support its broader …






