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Original Investigation
September 11, 2017

Research and Development Spending to Bring a Single Cancer Drug to Market and Revenues After Approval

Author Affiliations
  • 1Division of Hematology and Medical Oncology, Knight Cancer Institute, Oregon Health and Science University, Portland
  • 2Department of Preventive Medicine and Public Health, Oregon Health and Science University, Portland
  • 3Center for Health Care Ethics, Oregon Health and Science University, Portland
  • 4Myeloma Service, Department of Medicine, Memorial Sloan Kettering Cancer Center, New York, New York
  • 5Center for Health Policy and Outcomes, Memorial Sloan Kettering Cancer Center, New York, New York
JAMA Intern Med. Published online September 11, 2017. doi:10.1001/jamainternmed.2017.3601
Key Points

Question  What is the estimated research and development spending for developing a cancer drug?

Findings  In this analysis of US Securities and Exchange Commission filings for 10 cancer drugs, the median cost of developing a single cancer drug was $648.0 million. The median revenue after approval for such a drug was $1658.4 million.

Meaning  These results provide a transparent estimate of research and development spending on cancer drugs and show that the revenue since approval is substantially higher than the preapproval research and development spending.

Abstract

Importance  A common justification for high cancer drug prices is the sizable research and development (R&D) outlay necessary to bring a drug to the US market. A recent estimate of R&D spending is $2.7 billion (2017 US dollars). However, this analysis lacks transparency and independent replication.

Objective  To provide a contemporary estimate of R&D spending to develop cancer drugs.

Design, Setting, and Participants  Analysis of US Securities and Exchange Commission filings for drug companies with no drugs on the US market that received approval by the US Food and Drug Administration for a cancer drug from January 1, 2006, through December 31, 2015. Cumulative R&D spending was estimated from initiation of drug development activity to date of approval. Earnings were also identified from the time of approval to the present. The study was conducted from December 10, 2016, to March 2, 2017.

Main Outcomes and Measures  Median R&D spending on cancer drug development.

Results  Ten companies and drugs were included in this analysis. The 10 companies had a median time to develop a drug of 7.3 years (range, 5.8-15.2 years). Five drugs (50%) received accelerated approval from the US Food and Drug Administration, and 5 (50%) received regular approval. The median cost of drug development was $648.0 million (range, $157.3 million to $1950.8 million). The median cost was $757.4 million (range, $203.6 million to $2601.7 million) for a 7% per annum cost of capital (or opportunity costs) and $793.6 million (range, $219.1 million to $2827.1 million) for a 9% opportunity costs. With a median of 4.0 years (range, 0.8-8.8 years) since approval, the total revenue from sales of these 10 drugs since approval was $67.0 billion compared with total R&D spending of $7.2 billion ($9.1 billion, including 7% opportunity costs).

Conclusions and Relevance  The cost to develop a cancer drug is $648.0 million, a figure significantly lower than prior estimates. The revenue since approval is substantial (median, $1658.4 million; range, $204.1 million to $22 275.0 million). This analysis provides a transparent estimate of R&D spending on cancer drugs and has implications for the current debate on drug pricing.

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