Pharmaceutical R&D

Perceptions that the pace of new-drug develoment has slowed and that the pharmaceutical industry is highly profitable have sparked concerns that significant problems loom for future drug development.

The foregoing spurred a recent study by the Congressional Budget Office (CBO) which looks at the current state of pharmaceutical R&D, how it is affected by complex economic forces, and how efficiently new drugs are delivered.

CBO also examines the following related issues:

• What explains the cost of developing new drugs?
• Does federal investment in R&D stimulate or displace private investment?
• Has the drug industry's innovative performance declined?
• How profitable are drug firms,and how do profits affect the amount and type of R&D that companies conduct?

According to the study, R&D costs vary depending on the type of drug being developed, the highest generally being for a new molecular entity (NME), rather than a modification of an existing drug. A recent estimate for an NME is $800 million, but that amount factors in failed projects and forgone investments and reflects research strategies related to expected revenues.

Research and Development in the Pharmaceutical Industry (pdf, 596KB, 65p.), October 2006