A Revolution in R&D

Methodology
The many diverse studies on drug development
have reached diverse conclusions. They have put
the current price tag at anywhere between $350 million
and $800 million per drug (all underestimates,
in our view: our own calculation is $880 million).
Not surprisingly, when it comes to the likely impact
of genomics and genetics on the economics of drug
development, opinions diverge again.
For our study, we conducted an extensive program
of discussions in an effort to compile accurate figures
for all the main activities in the R&D process,
both pre- and post-genomics. The result is a robust
bottom-up model of R&D, based on the time, cost,
and likely success rate for each step of the value
chain.
Our model goes beyond existing models of R&D in
three important ways:
• It is the product of primary research. Other estimates
have tended to build on the findings of earlier
work; our model also draws on more than 100
discussions at nearly 50 companies and academic
institutions.
• It analyzes the discovery phase more closely than
has previously been possible. Earlier models typically
assigned a conjectural figure to represent
the sunk cost of discovery, but the art of discovery
is becoming industrialized, and we have duly
been able to model its activities more scientifically.
A more detailed understanding of the economics
of discovery has resulted, and that in turn
has allowed us to more accurately quantify the
impact of genomics on R&D. (See the chart on
page 60 for technologies modeled.)
• It is activity-based and flexible. The numbers
cited in this report represent an average drug,
unless noted otherwise, but in our research we
ranged far wider than that, and assessed each step
of the value chain under a range of circumstances.
So the model allows for scenario building
and sensitivity analysis, as well as enables us to
tailor inputs to match the unique circumstances
of individual companies.
As already mentioned, all numbers cited in the text
are for an average drug. In any individual case, cost
and time will vary according to factors such as therapeutic
area and target class.
All numbers cited in the text are for a relevant
drug, that is, one to which the technology under
discussion could be applied. Various technologies
may not apply to all targets or drugs. Where specific
limitations are likely to be a significant factor, that
is pointed out.
When we discuss the “value added” to a drug, we
are referring to its net present value: the current
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