The price of innovation: new estimates of drug development costs

J Health Econ. 2003 Mar;22(2):151-85. doi: 10.1016/S0167-6296(02)00126-1.


The research and development costs of 68 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 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 new drug is 403 million US dollars (2000 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 11% yields a total pre-approval cost estimate of 802 million US dollars (2000 dollars). When compared to the results of an earlier study with a similar methodology, total capitalized costs were shown to have increased at an annual rate of 7.4% above general price inflation.

MeSH terms

  • Capital Expenditures / statistics & numerical data*
  • Costs and Cost Analysis
  • Data Collection
  • Drug Approval / economics
  • Drug Evaluation / economics*
  • Drug Evaluation, Preclinical / economics
  • Drug Industry / economics*
  • Drugs, Investigational / economics
  • Humans
  • Inflation, Economic
  • Organizational Innovation
  • Research Support as Topic / economics*
  • United States


  • Drugs, Investigational