November 18, 2014 / 10:10 PM / 5 years ago

CORRECTED-Tufts says average new drug costs $2.6 bln to develop, critics wary

(Corrects spelling of Tufts Center executive director’s last name to Kaitin instead of Kaitlin, next to last paragraph)

By Ransdell Pierson

Nov 18 (Reuters) - The estimated average cost of developing an approved new drug has more than doubled to over $2.5 billion from a 2003 estimate by Tufts University, but critics questioned the figure and noted the school’s strong financial ties to the pharmaceutical industry.

The Tufts Center for the Study of Drug Development, located in Boston, in 2003 estimated the average cost for developing a new approved drug was $802 million. The estimate, for drugs tested in humans from 1983 to 1994, equaled $1.04 billion in 2013 dollars.

The center said its updated estimate of $2.56 billion in a study released on Tuesday is based on data from 10 drugmakers on 106 randomly selected drugs tested in humans from 1995 to 2007.

It assumes average spending of $1.395 billion on each drug, plus $1.163 billion in “time costs,” or financial returns that investors forego while a drug is in development.

The estimate, and earlier one, lump together the costs of developing approved drugs and of studying those that are never approved.

Many new drugs cost $75,000 or more for a course of treatment, which has sparked criticism from insurers and politicians. Drugmakers have defended the high prices by pointing to heavy spending on research.

“Drug development remains a costly undertaking despite ongoing efforts across the full spectrum of pharmaceutical and biotech companies to rein in growing research and development costs,” the Tufts Center said in a news release.

Medecins Sans Frontieres, a group known for sending doctors to hard-to-reach conflict zones, said in an emailed statement that the Tufts estimate is unreliable, in part because the industry does not provide details on its R&D spending.

“If you believe (the estimate), you probably also believe the earth is flat,” it said.

The group noted that Andrew Witty, chief executive of British drugmaker GlaxoSmithKline Plc, earlier this year called the then-estimate of about $1 billion a year to develop a new drug “one of the great myths of the industry” because it also included spending on failed drugs.

Some 40 percent of funding for the Tufts Center comes from unrestricted grants from drugmakers and companies that provide them services, according to its website.

Kenneth Kaitin, the center’s executive director, said no other academic institution focuses as intently on drug industry trends, and that its drug cost estimate is reliable.

“It is based on actual cost figures,” he added. (Reporting by Ransdell Pierson; editing by Andre Grenon)

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