Developing a new medicine is an expensive undertaking. An analysis published in the Journal of Health Economics in March 2016 found that the average cost of developing a drug is $2.558 billion USD. The analysis from the Tufts Center for the Study of Drug Development is based on an average out-of-pocket cost of $1.395 billion USD, plus the inclusion of what economists call “time costs,” described by Joseph A. DiMasi, director of economic analysis at Tufts, as “expected returns that investors forego while a drug is in development.”
Critics have complained that DiMasi’s estimates are too high, and that including lost revenue as drug development costs -- at a whopping $1.163 billion USD -- distorts the facts, and validates high prices for medicine.
Leaving time costs out of the equation:
Who paid for the study? That will tell you whether the numbers are believable or not. My money is on not!