Dr. Neil Riordan on health: what the evidence says · JRE #1066
“The biggest hurdle is that a new drug, if you look at the last several years, cost $2.5 billion to get to market.”
What the evidence says
Riordan's figure of roughly $2.5 billion per approved drug traces to a widely cited 2016 Tufts Center for the Study of Drug Development estimate (about $2.6 billion), which was funded by pharmaceutical industry sponsors, is not publicly reproducible, and includes an estimated cost of capital (opportunity cost) alongside assumptions about high clinical failure rates that roughly double the reported cash outlay. An independent peer-reviewed study published in JAMA in 2020, using only publicly available data on FDA-approved drugs from 2009-2018, estimated a median capitalized R&D cost of about $985 million per approved drug (mean approximately $1.3 billion), with substantial variation by therapeutic area. The $2.5 billion figure is not fabricated, but it sits at the high end of a contested range built on a non-transparent, industry-funded methodology, while independently verifiable data point to costs well below that figure for many approved drugs.