Rising Drug Costs –

As the costs of conducting clinical trials rises, why wouldn’t you look to offshore clinical research to another country? After all, if tech companies can save money by outsourcing customer service functions to India or the Philippines, can’t a biotech company save, too, by conducting R&D in Europe?

The answer is of course, yes, outsourcing can help costs. But even though some foreign countries may attract a U.S. life sciences startup by offering tax incentives and a less expensive workforce, no country may be immune from rising costs.

The cost of new drug development worldwide has been rising steadily since the 1970s. Last year, the average cost of testing new drugs – including studies conducted after receiving regulatory approval – and successfully getting the products to market was nearly $900 million, compared to about $800 million in 2001, according to the Tufts Center for the Study of Drug Development, which calculated the 2003 figures based on the dollars value in 2001 .

By contrast, in 1991 the average cost to develop a new drug was $318 million, based on the dollar’s value in year 2000, Tufts said.

What’s more is that the average costs rose despite the fact that it’s taking less time in the U.S. and Europe to push new drugs through the approval process. But many factors are driving up clinical-period related costs, says Joseph A. DiMasi, director of economic analysis at the Tufts Center.

“There is a greater emphasis on developing treatments for conditions associated with chronic and degenerative diseases, which increases clinical trial sizes and recruitment costs,” he says.

And that’s happening overseas, as well. For example, a number of Japanese companies have sought to carry out their clinical studies abroad, taking advantage of the lower costs and larger market size, according to the Japan Pharmaceutical Manufacturers Association. The group reported that as a proportion of total Japanese R&D expenditure, clinical development costs rose from around 34% in 1998 to nearly 40% in 2000.

Back home in the U.S., outsourcing in the U.S. pharmaceutical industry is growing in popularity, according to UBS Warburg. The investment bank reported that of the $30 billion that the U.S. pharmaceutical industry invested in R&D in 2001, around 20%-25% of that was spent on outsourcing. -Alastair Goldfisher

As the costs of conducting clinical trials rises, why wouldn’t you look to offshore clinical research to another country? After all, if tech companies can save money by outsourcing customer service functions to India or the Philippines, can’t a biotech company save, too, by conducting R&D in Europe?

The answer is of course, yes, outsourcing can help costs. But even though some foreign countries may attract a U.S. life sciences startup by offering tax incentives and a less expensive workforce, no country may be immune from rising costs.

The cost of new drug development worldwide has been rising steadily since the 1970s. Last year, the average cost of testing new drugs – including studies conducted after receiving regulatory approval – and successfully getting the products to market was nearly $900 million, compared to about $800 million in 2001, according to the Tufts Center for the Study of Drug Development, which calculated the 2003 figures based on the dollars value in 2001 .

By contrast, in 1991 the average cost to develop a new drug was $318 million, based on the dollar’s value in year 2000, Tufts said.

What’s more is that the average costs rose despite the fact that it’s taking less time in the U.S. and Europe to push new drugs through the approval process. But many factors are driving up clinical-period related costs, says Joseph A. DiMasi, director of economic analysis at the Tufts Center.

“There is a greater emphasis on developing treatments for conditions associated with chronic and degenerative diseases, which increases clinical trial sizes and recruitment costs,” he says.

And that’s happening overseas, as well. For example, a number of Japanese companies have sought to carry out their clinical studies abroad, taking advantage of the lower costs and larger market size, according to the Japan Pharmaceutical Manufacturers Association. The group reported that as a proportion of total Japanese R&D expenditure, clinical development costs rose from around 34% in 1998 to nearly 40% in 2000.

Back home in the U.S., outsourcing in the U.S. pharmaceutical industry is growing in popularity, according to UBS Warburg. The investment bank reported that of the $30 billion that the U.S. pharmaceutical industry invested in R&D in 2001, around 20%-25% of that was spent on outsourcing.