Biotech companies spend plenty to develop new treatments

Biotechnology companies spent roughly eight years and $1.2 billion to get a new treatment to market—about 24 percent more than it cost manufacturers of traditional drugs to develop a medicine, Tufts researchers report.

Development costs are higher for biotechnology companies, partly because it costs more for them to raise capital, according to research done by the Tufts Center for the Study of Drug Development (CSDD). Study author Joseph DiMasi, director of economic analysis at CSDD, in 2003 had pegged the cost of developing a traditional drug at $802 million, or $899 million when adjusted for inflation to 2005.

The cost of developing a drug or a biotechnology treatment probably is similar today to the 2003 figure, DiMasi said. The success rate for biotech drugs—with 30.2 percent approved for sale—was better than for pharmaceutical companies, which won clearance for 21.5 percent of their products.

“The costs certainly are significant,” DiMasi said, nothing that bringing down expenses might yield payoffs by increasing the number of products developed.

DiMasi’s study looked at the costs of 17 compounds developed by four unidentified biotechnology companies that were first tested in humans between 1990 and 2003. The study included the costs of researching about 500 compounds, most of which were never developed into approved drugs.

Biotechnology companies spent an average of $198 million during the preclinical phase of development, when a compound is tested in the lab and in animals, and $361 million during the clinical phase, when it is tested in humans. The cost of raising the capital was $682 million, more than half the total cost of developing a product, the report said.