How Much Does Research and Development Really Cost?

John Fisher
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Stopping Medical Injustice

Drug development is both a “lengthy and costly process.”[1]  Pharmaceutical companies are spending tremendous amounts of money on research and development and not necessarily seeing an equal rate of return.[2] 

In 2010, according to Pharmaceutical Research and Manufacturers of America (“PhRMA”), the pharmaceutical industry spent an estimated $67.4 billion dollars on R&D alone and, importantly, over twenty percent of sales went directly to R&D.[3]  According to a study in 2003, which analyzed sixty-eight randomly selected new drugs from ten pharmaceutical companies in 1997, the expense of bringing a single, new, drug to the market was estimated to cost pharmaceutical companies $802 million dollars.[4] 

As of 2005 it was estimated that the expense of bringing a new drug to the market had increased to $1.3 billion dollars, and today the number has reached $1.7 billion dollars.[5] 

The authors of this study previously considered profitability and return rates versus pharmaceutical R&D and they had “not found evidence of significant and sustained excess profits.”[6]  Surprisingly to many, only two out of ten marketed drugs return revenues that match or exceed R&D costs.[7]

What makes bringing a new drug to the market expensive?  There are several factors to consider, including the risky nature of drug development, the increasing duration of research, and most importantly, the FDA’s approval process.[8]  A significant aspect of developing a new drug is meeting the FDA’s standards for safety, efficacy, and marketing.[9]  The federal government’s involvement includes the FDA’s approval being required at two stages of the drug development process.[10]

But what do you think?  I would love to hear from you!  I welcome your phone call on my toll-free cell at 1-866-889-6882 or you can drop me an e-mail at [email protected] .  You are always welcome to request my FREE book, The Seven Deadly Mistakes of Malpractice Victims, at the homepage of my website at

[1] See J.A. DeMasi et. al., The Price of Innovation:  New Estimates of Drug Development Costs, J. of Health Econ. 22, 152 (2003).

[2] See id. at 182.

[3] Pharmaceutical Research and Manufacturers of America, Pharmaceutical Industry: 2011 Profile, Key Facts, available at [hereinafter Key Facts].

[4] DeMasi at 151.

[5] Key Facts.

[6] DeMasi at 182.

[7] Key Facts.

[8] Ceccoli at 165-71.

[9] Id. at 165.

[10] Id.

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