Review from UK consultancy suggests ten-fold increase in per medicine R&D costs over last 30 years

Inventing a new drug costs an enormous amount of money. It’s part of the reason why the pharma industry is struggling to fill its pipelines. But we’d like to think that – however slowly – that cost is coming down.

Unfortunately it isn’t, at least according to a review from the Office of Health Economics (OHE), a UK consultancy. The organisation looked at research published over the last 30 years and found that (in 2011 prices) costs increased from £125 million per new medicine in the 1970s to £1.2 billion in the 2000s.

The cause? Four reasons are given. First, so-called out-of-pocket expenses have increased 600%. Second, success rates have apparently fallen as drug makers have taken on more challenging disease areas, such as Alzheimer’s disease, arthritis and cancer – from 1 in 5 in the 1980s to 1 in 10 in the 2000s. Third, more extensive regulation and more complex science have increased the time from drug discovery to approval from 6 years in the 1970s to 13.5 years in the 2000s. And fourth, the cost of capital has risen from 8% in the 1970s to 11% in the 2000s.

The report has been welcomed by the Association of the British Pharmaceutical Industry (ABPI), which part funds the OHE. Chief executive Stephen Whitehead said in a statement: ‘Pharmaceutical companies are doing all they can to mitigate these rising R&D costs, such as making decisions earlier in the medicine development process about whether a treatment is viable or not […] But the Government must play its part too. We need to ensure that companies get a fair reward for the treatments companies create.’