Comparison of the costs of drug development under different methods of calculation

Olga Rozanova ()
Additional contact information
Olga Rozanova: Gaidar Institute for Economic Policy; HSE University (ICEF)

Economics Bulletin, 2026, vol. 46, issue 1, 15 - 24

Abstract: This paper compares two methods for estimating drug development costs: the conventional cost per expected approval and the probabilistic cost to achieve at least one approval with a given confidence level. The paper shows that, for typical success rates and high confidence levels, the probabilistic approach requires 2–4 times more trials—implying that standard average-cost figures can underestimate reliable investment by a similar factor. Extending the model to multiple phases, the analysis demonstrates that while the gap between the two objectives narrows over time, stochastic transitions often leave portfolios underfunded for subsequent phases. Thus, expected-value estimates carry a high risk of failing to meet confidence-based portfolio goals, with direct implications for research funding and policy design.

Keywords: costs of drug development; pharmaceutical R& D; number of clinical trials (search for similar items in EconPapers)
JEL-codes: I1 O3 (search for similar items in EconPapers)
Date: 2026-03-30
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2026/Volume46/EB-26-V46-I1-P2.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-24-00490

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().