New report shows rise in cost of medicines R&D

A new report from the Office of Health Economics in the United Kingdom shows the cost of developing a successful new medicine has increased from $199 million in the 1970s to $1.9 billion in the 2000s.

The R&D Cost of a New Medicine identified four factors contributing to increasing R&D costs: higher company out-of-pocket costs, up nearly 600 per cent over the period; lower success rates from clinical development as researchers tackle tougher therapeutic areas such as dementia and arthritis; increase in R&D time as science becomes more complex, from six years to 13.5 years; and increases in the cost of capital from 8% to 11%.

Medicines Australia chief executive Dr Brendan Shaw said: “This study confirms what we have known for some time, namely that it is taking longer and is becoming more expensive to develop new medicines.

“From time to time we hear people question whether it really costs this much money to develop new medicines for the community.

“There’s a suggestion that somehow the development of new medicines can be done on the cheap and should be priced as such.

“This new study categorically shows that it costs companies a lot of money to take a new medicine from first discovery in a laboratory, through clinical trials and ultimately make it available for patients.

“It is a costly exercise, but all this investment results in new medicines and vaccines for diseases like cancer, dementia, mental illness, arthritis, cardiovascular disease and HIV.

“This report is a timely reminder of the importance of investing well in the development process, as well as ensuring that the regulatory and business environment for the development of new medicines is as efficient and effective as possible.

“The commercial business model is undergoing change. Governments, payers and the community need to be aware of this and ultimately work with industry to get a supportive environment that encourages innovation in the future medicine.”

The report is available at


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