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The Deane F. Johnson Center for Neurotherapeutics at UCLA

Leadership in Clinical Trials Research

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Home arrow JCNT Resources arrow For Patients arrow What Determines the Cost of Drugs?
What Determines the Cost of Drugs? Print E-mail
  • Large laboratories with many staff are required to discover chemicals that may act as drugs.
  • Many doctors and clinics are needed to test drugs in people to ensure that they work and are safe.
  • Many potential drugs are found to be toxic while they are being studied and cannot be approved by the Food and Drug Administration (FDA) for marketing. These drugs can cost millions of dollars in research before their toxicity is discovered.
  • For every hundred chemicals chosen as possible drugs, only five will eventually be approved by the FDA to be sold to the patient. The cost of an approved drug must cover the cost of all the drugs that fail.
  • Generic drugs are cheaper because the company does not do any research and the cost of the drug does not need to pay for drug discovery and development. The company does not have to pay for failed drugs.
  • The total cost of developing a new drug is approximately $400 million in direct costs.
  • 97% of new drugs come from pharmaceutical companies; very few drugs (3%) come from other sources.
  • All branded drugs eventually become generic. Newer drugs are more expensive until their patent ends and then cheaper generic forms can be manufactured. New generics depend on new drug development.
 
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