Does R&D for cancer drugs cost less than industry-backed estimates?

The Tufts Center for the Study of Drug Development estimates it costs $2.7 billion to bring a drug into market, taking into consideration research and development (R&D) expenditures by pharmaceutical companies. One of the main justifications for high drug prices is the substantial R&D costs to bring drugs to American consumers—but does it really cost that much?

A new study in JAMA Internal Medicine—by researchers Vinay Prasad, MD, an oncologist at Oregon Health and Science University and Sham Mailankody, MBBS, of Memorial Sloan Kettering Cancer Center—shows the average cost of developing a single cancer drug was $648 million. Additionally, the revenue generated after approval of the drugs collectively was $67 billion.

“This analysis provides a transparent estimate of R&D spending on cancer drugs and has implications for the current debate on drug pricing,” the authors wrote.

Prasad and Mailankody analyzed the R&D costs of 10 companies that each had one cancer drug on the market from Jan. 1, 2016, to Dec. 31, 2017, using U.S. Securities and Exchange Commission filings. Cumulative R&D spending was estimated from initiation of drug development activity to the date of FDA approval.

“The Tufts analysis lacks transparency and is difficult to judge on its merits,” the authors wrote. “It cannot be properly analyzed without knowing the specific drug products investigated, yet this has been deemed proprietary information and is governed by confidentiality agreements.”

Many pharmaceutical companies spend millions of dollars in R&D for drugs are ineffective or unsafe. The study also takes into account the cost of such failures. Because the chosen pharmaceutical companies were simultaneously developing several drugs, the authors included the R&D costs for each company’s entire portfolio of drugs, of which only one drug was ultimately approved.

“The cost of anticancer drugs continues to increase, with drugs routinely priced more than $100,000 per year of treatment and some nearing the $200,000 per year threshold,” the authors wrote. “High drug prices have negative effects on patients and society, and groups of physicians, patients and policymakers have voiced their opposition to these prices.”