Time is money in drug development – Healthcare Economist

Delays in drug approval cost pharmaceutical companies money. These costs include both lost sales and the additional cost if clinical trials need to last longer. While these facts are not in doubt, a key question is how much do approval delays cost companies?

an article from Smith, DiMasi and Getz (2024) provides the answer.

…a single day is equivalent to approximately $500,000 in lost sales of prescription drugs or biologics, with daily prescription sales for infectious, hematologic, cardiovascular, and gastrointestinal diseases being among the highest…The estimated direct daily cost of conducting a clinical trial is approximately $40,000 per day for Phase II and III Clinical Trials, with respiratory, rheumatology, and dermatology having the highest relative daily direct costs.

About 60% of the drugs were first launched in the United States. About 37.7% of the drugs were “blockbuster” drugs with more than $1 million in sales per day; 3.1% of medications had sales of more than $7 million per day.

Cardiovascular, hematologic, infectious, and oncologic medications had the highest sales per day based on median sales per day.

The average clinical trial cost $25 million and took 614.8 days to complete. As expected, later-stage clinical trials are more expensive:

…Phase III clinical trials have the highest daily cost: $55,716. Phase II clinical trials cost about half that amount, $23,737 per day (see Table 8). Phase IV and Phase I trials have the lowest daily costs: $14,091 and $7,829 per day, respectively.

Methods

Carpet revenue data comes from Cortellis’ database of drug sales for all drugs and biologics launched in 2000 or later. This data contains worldwide sales figures from the company’s annual reports. Because the drug sales data were highly skewed to the right, the authors removed (i) COVID-19 drugs and vaccines and (ii) any drugs with sales >2 standard deviations from the mean.

Daily drug development costs were estimated from a proprietary data set developed and maintained by the Center for the Study of Drug Development (CSDD) at Tufts University.

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