Summary
THE PHARMACEUTICAL DRUG DEVELOPMENT PROCESS
The pharmaceutical drug development process includes three stages: research and development (R&D), approval, and postmarketing. On average, drugs take 10-15 years from
discovery to approval. Before a drug can be marketed in the United States, it must be approved by the Food and Drug Administration (FDA). To obtain approval, the manufacturer
submits to FDA a new drug application (NDA) or a biologics license application (BLA) containing safety and e_ectiveness data generated in preclinical and human clinical trials.
FDA also has a number of programs to expedite development and review of drugs that address unmet medical need. Costs facing drug manufacturers include the cost of R&D,
application fees, post-market studies, and advertising. There are widely ranging estimates for clinical trial costs, depending on the therapeutic area and study's assumptions. This
infographic uses clinical trial cost estimates from a 2014 study conducted under contract to the Department of Health and Human Services.* To help o_set these costs and
incentivize drug development, the federal government o_ers pharmaceutical manufacturers orphan drug and R&D tax credits, as well as research deductions. While
comprehensive data on use of these credits and deductions by the industry are not available, CRS analysis shows that the R&D tax credit can be a signi_cant tax subsidy, resulting
in negative tax rates in some cases. In addition, there is a federal tax deduction available for business advertising expenses.
RESEARCH & DEVELOPMENT
APPROVAL
POSTMARKETING
The study of the fundamental
mechanisms of biology and behavior.
Leads to knowledge of disease/condition
that aids in drug development.
Research on potential drug candidates,
usually using lab animals, cell cultures,
samples of human/animal tissue, and/or
computer models.
CLINICAL RESEARCH
Phase I Clinical Trials
Participants: 20-100
Purpose: safety and dosage
Length of study: several months
Average cost: $4 million ($1.4-$6.6 million)
Phase 2 Clinical Trials
Participants: 100s
Purpose: e_ectiveness and side e_ects
Length of study: 2 years
Average cost: $13 million ($7-$19.6 million)
Phase 3 Clinical Trials
Participants: 1,000s
Purpose: e_ectiveness and monitoring
adverse events
Length of study: 1-4 years
Average cost: $20 million ($11.5-$52.9 million)
Application Submission
NDA or BLA is submitted to FDA. For FY19:
Application fee = $2.6 million/application
Annual program fee = $309,915/approved drug
Application Review Goals
Standard review= 10 months
Priority review= 6 months
Application
Approved
Application
is not
Approved
Drug is marketed and
sold by company
Basic Research Preclinical Research
Phase 4 Clinical Trials or Studies
Participants: 1,000s
Purpose: e_ectiveness and monitoring
long-term e_ects
Average cost: $20 million ($6.8-$72.9 million)
FDA _les (or refuses to _le)
NDA/BLA within 60 days
Iterative
Process
Prepared by Agata Dabrowska (Analyst in Health Policy), Kavya Sekar (Analyst in Health Policy) and Jamie Hutchinson (Visual Information Specialist).
For more information see CRS Reports R41983, R44832, R44620, IF11083, and *Eastern Research Group, Examination of Clinical Trial Costs and Barriers
for Drug Development, (July 2014).
Note: New drugs are often
shielded from competition for a
number of years due to patents
and regulatory exclusivities.
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10
20
30
40
50
60
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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
MOVE ONTO NEXT PHASE
Development: use of research for
new or improved goods, services,
or processes.
Applied Research: conducted to
meet a commercial objective or
practical aim.
Basic Research: developing new
knowledge; no speci_c application.
Pharmaceutical and Medicines Industry
(CY2016 spending, domestic R&D only)
National Institutes of Health
(FY2016 Obligations)
$41.54
$13.71
$15.56 $9.23
$15.14
Discovery
Identi_cation of chemical
or living compounds
capable of managing or
curing a disease.
Source: IQVIA Institute, "Medicine Use and Spending in the U.S.:
A Review of 2017 and Outlook to 2022"
Source: L.M Schwartz and S. Woloshin, "Medical Marketing in
the United States, 1997-2016," JAMA, 2019, 321(1), p. 80-96.
Note: Novel drugs include new molecular entities approved under NDAs and new therapeutic biologics
approved under BLAs. The active ingredient(s) in a novel drug has never been approved in the U.S.
70%
33%
25%-30%
TOP 5 DRUGS BY REVENUE IN 2017
JANUVIA
REMICADE
HARVONI
ENBREL
HUMIRA
Billions of dollars
$5.0
$5.4
$6.0
$8.7
$16.9
RESEARCH AND DEVELOPMENT BY SECTOR
Investigational
new drug
application
(IND) is
submitted to
FDA
The pharmaceutical drug development process includes three stages: research and development (R&D), approval, and postmarketing. On average, drugs take 10-15 years from
discovery to approval. Before a drug can be marketed in the United States, it must be approved by the Food and Drug Administration (FDA). To obtain approval, the manufacturer
submits to FDA a new drug application (NDA) or a biologics license application (BLA) containing safety and e_ectiveness data generated in preclinical and human clinical trials.
FDA also has a number of programs to expedite development and review of drugs that address unmet medical need. Costs facing drug manufacturers include the cost of R&D,
application fees, post-market studies, and advertising. There are widely ranging estimates for clinical trial costs, depending on the therapeutic area and study's assumptions. This
infographic uses clinical trial cost estimates from a 2014 study conducted under contract to the Department of Health and Human Services.* To help o_set these costs and
incentivize drug development, the federal government o_ers pharmaceutical manufacturers orphan drug and R&D tax credits, as well as research deductions. While
comprehensive data on use of these credits and deductions by the industry are not available, CRS analysis shows that the R&D tax credit can be a signi_cant tax subsidy, resulting
in negative tax rates in some cases. In addition, there is a federal tax deduction available for business advertising expenses.
TOTAL
FDA'S CENTER FOR DRUG EVALUATION AND RESEARCH NOVEL
DRUG APPROVALS _NDAs AND BLAs_
In 2016, pharmaceutical companies
spent $20.3 BILLION on
marketing to health care
professionals and $6 BILLION
on direct-to-consumer advertising
Billions of dollars
Source: CRS analysis of National Science Foundation (NSF) Business, Research, Development and Innovation
Survey data and Federal Funds for Research and Development Survey data
Note: This _gure is for illustrative purposes only and is not a comprehensive accounting of all R&D by federal
agencies or industry related to pharmaceutical drug development.
In 2018, of the 59 novel drug approvals, 43 (73%) were designated in at least
one expedited program.