Pharmaceutical Research and Development: A Description and Analysis of the Process

Publication Date: April 2001

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health; Manufacturing and industry

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Abstract:

A central element of the debate about inclusion of prescription drug benefits in Medicare is the price of prescription drugs. A key issue in the debate concerns the relationship between those prices and the pharmaceutical research and development (R&D) costs. While this report will not analyze that relationship directly, it does present a description and assessment of the pharmaceutical R&D (drug development) process and the factors that affect costs. Such an analysis should be useful in addressing questions about the cost of pharmaceutical R&D and the dependence of prescription drug prices in the United States on those costs.

Pharmaceutical R&D (drug development) consists of several stages. It begins with drug discovery followed by preclinical drug development where thousands of candidate chemicals may be screened for attractive therapeutic, pharmacological, and toxicity properties. Successful candidates -- usually 5 or fewer from an original pool that may total 10,000 -- are then subjected to three stages of clinical trials testing the drugs' effectiveness and side effects. If a drug emerges from the trials showing a significant therapeutic benefit, it is submitted to the Food and Drug Administration for marketing approval. If approved, post-marketing surveillance ensues looking for possible safety concerns that did not emerge in the earlier trials.

The entire drug development process typically takes nearly 15 years. The largest share of that time is devoted to the three stages of clinical trials. Although there is no firm figure for the cost of drug development, estimates have run as high as $500 million for the costs associated with a typical drug. While these costs cannot be stated with any real precision, the true cost is still probably high, and the major share of those costs is for clinical trials.

Recent advances in molecular biology making use of genetic data developed in the human genome project offer the promise of significantly shortening both drug development and clinical trial time, although it may be several years before these goals are routinely realized. Any significant shortening of the development time could reduce pharmaceutical R&D costs and, possibly, prescription drug prices. Another factor in the cost equation is the contribution of basic biomedical research funded by the National Institutes of Health. Such research is very important for drug development, and benefits the pharmaceutical industry by reducing its R&D costs.

There are several issues about pharmaceutical R&D that Congress may decide to monitor closely. Two, which are within the scope of this report, concern federal biomedical R&D funding and clinical trial practices. With respect to the first, a particular concern is the possibility of unnecessary overlap in research sponsored by both NIH and the industry as the latter strives to incorporate more of the promise of molecular biology into the pharmaceutical R&D process. With respect to clinical trial practice, of specific concern are human subject protection and the potential for conflict of interest on the part of academic researchers taking part in clinical trials.