01733nas a2200301   4500000000100000000000100001008004100002260001200043653002400055653002200079653002800101653001800129653001800147653001500165653002800180653001300208653002800221653001800249100002100267700002300288700002100311245007400332856008700406300001000493490000700503520090700510022001401417       2016                            d  c2016-0510aBiomedical Research10aCapital Financing10aCosts and Cost Analysis10aDiscount rate10aDrug Industry10aInnovation10aPharmaceutical industry10aR&D cost10aTechnical success rates10aUnited States1 aJoseph A. DiMasi1 aHenry G. Grabowski1 aRonald W. Hansen00aInnovation in the pharmaceutical industry: New estimates of R&D costs  uhttps://www.sciencedirect.com/science/article/abs/pii/S0167629616000291?via%3Dihub  a20-330 v473 aThe research and development costs of 106 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug and biologics development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per approved new compound is $1395 million (2013 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 10.5% yields a total pre-approval cost estimate of $2558 million (2013 dollars). When compared to the results of the previous study in this series, total capitalized costs were shown to have increased at an annual rate of 8.5% above general price inflation. Adding an estimate of post-approval R&D costs increases the cost estimate to $2870 million (2013 dollars).  a1879-1646