| We do have some shaky and hard to interpret data. Published estimates of trial costs from a 2011 systematic review ranged over an OOM.[1] A 2017 report focused on 7 top-20 companies and 726 studies from 2010-2015 found " median cost of conducting a study from protocol approval to final clinical trial report was US$3.4 million for phase I trials involving patients, $8.6 million for phase II trials and $21.4 million for phase III trials". [2] These are not all that far off from another 2016 study on cost drivers of pharma clinical trials in the US using means and breaking down costs by therapeutic area. [3] Plugging the first study's numbers into your 1000-drug profile, we'd have: $ 1.3 billion for Phase 1 failures (370 drugs) $ 3.7 billion for Phase 2 failures (435 drugs) $ 1.8 billion for Phase 3 failures ( 82 drugs) $ 2.4 billion for Phase 3 successes (113 drugs) That sums to $9.2 billion spent against 113 successful drugs, or about $80 million per successful drug. This implies the full cost of a successful drug is almost 4x what was spend on its development. One limit here is we're working with medians, not means, and I wouldn't be surprised if this is an underestimate of clinical trial costs. Roche has had pretty stable net income (profit) of $9.2-$15.2B/year from 2011-2023 against revenue from $49.9-$72B/year in the same time period. Using this estimate, ignoring inflation, if they ran 1,000 clinical trials per year it would account for a maximum of about 18% of their costs and they'd get 113 new drugs out of it annually. Obviously that is not what's happening: there are an average of 53 FDA new drug approvals per year across the entire industry. If Roche was the only pharma company running clinical trials, the total cost of those trials would be more like $4B, so a max of about 10% of their annual costs. In reality this estimate makes it seem like it must be substantially lower. The Congressional Budget Office[4] says total pharma R&D spending in 2019 was $83 billion. With 53 new drug approvals per year on average, that implies about an average cost of about $600 million per drug in R&D spending, compared with the $80 million estimate obtained above. So this makes it sound like running clinical trials account for only about 10% of total R&D spending. Given that Roche's costs alone look to be in the tens of billions per year, as compared to $83B or so annually for R&D across the industry, it also looks like R&D is only a part of the story on cost drivers for pharma companies. Google is not being helpful on this question (almost all the conversation is on R&D cost, it seems), but my guess is it's costs of manufacture, legal, sales, etc. [1] https://www.sciencedirect.com/science/article/pii/S016885101...
[2] https://www.nature.com/articles/nrd.2017.70.pdf
[3] https://pubmed.ncbi.nlm.nih.gov/26908540/
[4] https://www.cbo.gov/publication/57126 |
Marketing. At least 7 of the top 10 pharma companies globally have marketing as a multiple of R&D for their spending (sometimes up to 7x). IIRC, at the other 3, it still exceeds R&D, less egregiously.
The big issue with "Marketing" spend is that though these numbers are global, there are only two countries in the world where you can advertise prescription medicines to consumers: the US, and New Zealand (and the latter, if I recall, is trying to phase it out, and only allowed it after being bullied by the US on a Trade Agreement).
So you end up with "US Marketing spend at many pharmaceutical companies grossly outpaces their global R&D spend" (and while a not insignificant portion of R&D happens in the US, most of those companies also have a notable R&D investment in Europe).
Marketing wouldn't go to zero without that, of course, but it'd be a huge sea change.