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New and more effective drugs are helping people live healthier and longer lives, but the research-and-development (R&D) costs involved in bringing the drugs to market are soaring. That’s the conclusion of a new Harvard Kennedy School Faculty Working Paper coauthored by Professor Emeritus F.M. Scherer.
“R&D Costs and Productivity in Biopharmaceuticals” provides a thorough cost analysis of drug development efforts in the U.S. pharmaceutical industry.
“The research and clinical testing costs underlying pharmaceutical innovations have risen greatly over recent decades to levels measured in the hundreds of millions of dollars per approved new molecule,” writes Scherer. “By any reckoning, R&D costs per approved molecule have risen…most likely at a rate of approximately 7 percent per year after stripping out the effects of general economic inflation.”
Scherer argues that costs could be better contained, although not without some potential drawbacks.
“It is clear that clinical success may be achieved at substantially lower cost with alternative models of pharmaceutical development and testing, but embracing those alternatives requires streamlined regulatory and organizational approaches and sacrifices in the richness of the evidence on the basis of which physicians must make subsequent prescription choices,” he writes.
F. M. Scherer is Aetna Professor Emeritus. His research specialties are industrial economics and the economics of technological change.