Pharmaceuticals: cost of drug development in the U.S. since 1975

The cost of drug development totaled approximately one billion U.S. dollars in the decade from 1990 to 1999, but this expense has more than doubled in the years that have followed, reaching around 2.6 billion U.S. dollars.

Companies count the costs of drug development

Greater challenges in the early stages of clinical trials – leading to higher failure rates – is one reason for the rising research and development (R&D) costs. Members of the trade group PhRMA (Pharmaceutical Research and Manufacturers of America) spent approximately 80 billion U.S. dollars worldwide on R&D in 2018 – expenditure in the companies’ domestic market of the United States contributed an overwhelming share.

How long does it take for a new drug to enter the market?

Developing a new innovative medicine in the United States requires not only money but time. Following the initial research, manufacturers must perform a number of clinical trials before gaining final approval from the U.S. Food and Drug Administration (FDA) – for cancer drugs, this entire process can take up to 15 years. Trials take place to determine whether the drug can provide true health benefits to humans.

Cost of developing a drug in the U.S. from the 1970s until today (in million U.S. dollars)*

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Source

Release date

July 2019

Region

United States

Survey time period

1975 to early 2010s

Supplementary notes

PhRMA stands for Pharmaceutical Research and Manufacturers of America.
* Including the cost of failures.
** Previous research by the same author estimated average R&D costs in the early 2000s at $1.2 billion in constant 2000 dollars (see DiMasi JA, Grabowski, HG. The cost of biopharmaceutical R&D: is biotech different? Manage Decis Econ. 2007;28:469-479). That estimate was based on the same underlying survey as the author’s estimates for the 1990s to early 2000s reported here ($800 million in constant 2000 dollars), but updated for changes in the cost of capital.

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Statistics on "U.S. pharmaceutical industry"

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