Cost of developing new drugs: $1 billion plus …

A bio-pharmaceutical fact sheet prepared in May 2008 by Industry Canada senior policy officers Joanna Rosborough and Tereasa Chudy for then industry minister Jim Prentice and retrieved using federal access to information laws has these fascinating (to me, anyhow) facts on the costs Big Pharma incurs trying to find the next Viagra.
All of this was germane (at the time and, I assume, still is) to the government because the lobby group for the big pharmaceuticals had been pushing for an extension on their patent protections, promising, in return, to spend 10 per cent of Canadian sales on R&D in Canada. The Industry Canada policy officers note that: “… after peaking in 1997 at 12.9% [of sales], [Big Pharma spending on R&D] has declined to 8.5% in 2006. The dollar value of their R&D has been flat at about $1.2 billion while sales have continued to grow. However, it is important to note that this percentage does not include the S1.5 billion of biotechnology R&D in Canada undertaken by companies who do not yet have a patented product on the market.”

• Costs of research and Development R&D costs per drug in 2005 averaged US$605 million for chemical pharmaceuticals and US$559 million for bio-pharmaceuticals and took 12-13 years to reach market approval by health authorities (source: Tufts Center for the Study of Drug Development).
  Full costing {i.e., amortization of research failures and opportunity cost of capital) raises average costs to USS900 million for phannaceuticals and USSI .24 billion for bio-pharmaceuticals (the costs are higher for bio-pharmaceuticals due to longer development times).
  There is variability between firms depending on the drug, number of failures and government R&D funding. In Canada, drug R&D costs are lower due to lower R&D and clinical trial costs (KPMG).
  A generic drug may take 2 to 3 years and requires considerably less R&D to develop and prove equivalency with the original drug.
• Cost of marketing On average the cost of marketing, after health approvals, is double the cost ofR&D. However, these costs are much lower in Canada then in the U.S. because direct-to- consumer advertising is restricted.
• Risks and Ratios of Success: 1 in 10,000 molecules entering research are successfully developed into a marketable therapeutic drug.

The pharmaceutical industry in Canada, Industry Canada says, is largely based in Ontario and Quebec with 47 per cent of the country's 262 pharma firms based on Ontario and 43 per cent based in Quebec. Only 10 per cent — that's less than 30 firms — are located in other provinces. In 2006, pharma companies collectively employed 40,000 people and spent $1.3 billion on R&D. Canadian pharma companies had total sales in 2006 of $17.6 billion, with Pfizer, Johnson & Johnson, Apotex, AstraZenecas and GlaxoSmithKline leading the way, according to the Industry Canada fact sheet.
Of some note, one-third of the country's top R&D spenders are pharma/biotech companies. Apotex, the leader from that sector, placed 12th in a 2007 ranking by Research Infosource [PDF] among all companies in R&D spending with an estimated $179 million spent that year. GlaxoSmithKline was just behind it at 13th with $177 million.
I checked out the 2008 list from Research Infosource,[PDF] which quotes 2007 financial data, incidentally, and Apotex had jumped to the 10th spot with an R&D spend of $182 million that year but was second in the sector behind Sanofi-Aventis Group which, at number 9, spent $207 million on R&D. Who was number one? Nortel. Sigh. It spent $1.85 billion on R&D in Canada in 2007.