No factor defines success and failure for a drug company more than this: Companies that invent more, better drugs at a lower cost do better than those that hemorrhage cash but never get an important product to market. Yet 19 in 20 medicines in experimental development fail, meaning a great many companies fail too.
For years, researchers, including one team from Tufts University and another at Eli Lilly, have estimated the cost of inventing and developing a drug at $1 billion or more. These estimates try to exclude costs not directly related to a drug’s approval and also don’t allow for any comparisons between companies. Last year, for the first time, I did something far cruder: I took the 15-year research spending of a group of big pharmaceutical companies and divided it by the number of new drugs (technically new molecular entities, the Food and Drug Administration’s term for drug molecules that have not been approved in any form for any use previously).