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New Study on R&D Costs Available

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  • 1. New OHE Study on Pharmaceutical R&D Costs ReleasedLondon. 3 December 2012. The Office of Health Economics today released a comprehensive studyof the cost of R&D for new medicines. It confirms research published to date, which shows anincrease in costs from £125 million ($199 million) per new medicine in the 1970s to £1.2 billion($1.9 billion) in the 2000s (both in 2011 prices).Four factors are increasing R&D costs: (1) higher out-of-pocket costs, up nearly 600% from the1970s to the 2000s; (2) lower success rates for clinical development as tougher therapeutic areasare tackled—e.g. neurology (Alzheimer’s), autoimmune diseases (arthritis), and oncology—from 1in 5 in the 1980s to 1 in 10 in the 2000s; (3) increases in R&D times as both regulation and sciencehave become more complex, from 6 years in the 1970s to 13.5 years in the 2000s; and (4) increasesin the cost of capital—i.e. providing returns to funders that reflect the high risks of investing inmedicines R&D, from 8% in the 1970s to 11% in the 2000s.Companies continue to emphasise changes that are intended to improve the efficiency of R&Ddecisions, addressing those factors within their control. This includes, for example, makingdecisions far earlier in R&D about the market prospects of a drug candidate and more tightlymanaging clinical trial costs, often by outsourcing some aspects and/or siting some trials in lower-cost locations.Rapidly evolving R&D technology requires a wide range of expertise and data. New collaborationsare arising that involve a range of public and private entities, sharing both risks and rewards. DrMestre-Ferrandiz, lead author on the study, points out that ‘Just as new approaches to R&D arecrucial to the future, so are new approaches to facilitating market entry and use. These areessential both to encouraging R&D and ensuring that patients have the earliest access possible tolife-changing therapies’.Contact: Jorge Mestre-FerrandizEmail: jmestre-ferrandiz@ohe.orgPhone: +44.20.7747.8860Materials: http://news.ohe.org/The Office of Health Economics is a research and consulting organisation that has been providingspecialised research, analysis and expertise on a range of health care and life sciences issues andtopics for 50 years. Visit us on the web at www.ohe.org.Office of Health Economics • Southside, 7th Floor • 105 Victoria Street • London SW1E 6QT • UK

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