Our own estimate of pharmaceutical R&D is often misquoted as an average of $43 million per new drug, which commentators reject as being absurd. However, we make clear this estimate for the year 2000 does not include the cost of discovery (because it varies greatly and no one has accurate figures), nor the "cost of capital" (for reasons explained in our article which can be read here). Our estimate is the net cost to major companies after taxpayers cover about 50% of their R&D expenses. We use the median cost because the average cost gets inflated by a few costly R&D projects.So much for the claims that "a new drug costs over a billion dollars".
In sum, we estimate that the median, net, corporate cost to develop a new drug, based on the confidential cost data that companies reported to their policy research center at Tufts University, is $56 million in 2011, plus the unknown company costs of discovery and the artificial estimate of profits foregone, if you think it should be added. We also show that R&D costs for in-house new active ingredients are much higher, and costs for me-too variations are much lower than this single figure.
Our estimate is almost double the only solid corporate report of R&D costs, which can be found in audited tax returns from the late 1990s. Here companies reported average costs for clinical trials per drug of only $22.4 million. Not $224 million but $22.4 million
if the Forbes figures and business arguments are correct, then nearly all of the global pharmaceutical companies listed in their article would have gone bankrupt between 1997 and 2011.