Process and Costs of Getting a New Drug to Market

The process of taking a synthesized compound to market as a drug takes years, even decades, with the monetary cost of such an endeavor averaging $2 billion per approved drug. With such high risk and no promise of reward, companies and institutions all around the world still work toward inventing, testing and manufacturing these drugs.

From the early days of penicillin to the recent blockbuster success of drugs like Humira, the general public always has always had a keen interest in medicinal research. And why not, drugs improve the lives of ourselves and the people around us. But drug discovery doesn’t just ‘happen’ overnight, time and money (a lot of it!) is required to drive the required processes. We take a look at the huge efforts involved in getting a new drug from the lab bench to the pharmacy shelf.

“The drug industry harbors a dirty secret. New drugs are small organic molecules and small organic molecules are made by chemists”

Peter Goodfellow, Senior Vice President of Discovery Research at GlaxoSmithKline (Retired)

Discovering the Hit Compound

While the focus is now shifting toward biologicals and larger, peptide based drug derivatives, the majority of drugs in the market are small molecules. The techniques used to design and synthesize these small molecules are of another topic altogether (too broad to be covered here). It takes thousands of synthesized compounds and years of work identifying ‘hits’ to deliver a promising candidate that a pharmaceutical company will push through to clinical trials, but once a lead compound has been finalized, the next steps are to:

  1. Identify the pharmacophore – the active functional group(s) of the molecule – so that subsequent ‘discovery’ chemistry can be efficiently carried out by making analogues based on it
  2. Scale up! The initial route of discovery uses techniques that usually are applicable only to making small batches of compound; synthesis would need to be optimized for large-scale manufacturing
  3. Reduce costs! From a manufacturing point of view, the best chemistry is simple chemistry. Expensive reagents and highly reactive precursors might turn an R&D chemist on, but this equates to costs in terms of raw materials and safety measures.

Clinical Trials

Pre-clinical trials on animals are then conducted to gather toxicology data on the drug, but really the majority of safety and efficacy information can only be obtained through human clinical studies. The plan for human testing is put through an Investigational New Drug (IND) application, presenting all the existing data on the drug to the Food and Drug Administration (FDA) or an equivalent authority in other countries.


Phase I trials can start once the FDA gives the green light, in which a small group of healthy volunteers (usually 20 to 80) take very low doses of the drug to determine its effects on humans. Safety and tolerability have to be monitored closely, as there have been cases of even phase I trials causing death.

Phase II trials continue with small scale efficacy and dosing studies on a group of around 100 patients, essentially to determine the correct dosage to administer that should produce the desired therapeutic effect. Safety and efficacy is also monitored.

Phase III trials comprise of comparative studies to see if the treatment is actually better than existing drugs on market, and is conducted on  large number of patients (in the thousands). These studies usually comprise different populations and regions, different dosages, and even different combinations with other drugs.

The company can then submit a New Drug Application (NDA) that includes all animal and human data and analyses of the data, as well as information about how the drug behaves in the body and how it is manufactured. On average, only 13.8% of all drugs that enter clinical trials even make it to a NDA2. The FDA then reviews every bit of information, from the manufacturing facility standards to the labeling of the drug package before choosing to approve it for market.


But that’s not the end of clinical trials! Phase IV trials continue after the drug has been marketed, that are in place to detect longer term unexpected adverse events. The FDA requires companies to comply by submitting regular safety updates from the trials to them.

Wrapping it Up

Now while drug discovery already sounds long and tedious, let’s take a look at some of the staggering numbers involved3,4,5. The table below shows costs of R&D for an average investigational drug, from discovery to market, adjusted to a 2018 dollar value. The costs have been blanketed to cover failed trials throughout the life cycle of the successful drug candidate, based on a predicted final overall success rate of 16.7%.


As can be seen in the data gathered, with appropriate allocation of costs to failed discovery endeavors over time, the average cost for a pharmaceutical company to bring a drug to market is pushing the $2 billion mark. Despite over $50 billion in yearly R&D spending by the larger pharmaceutical companies, the FDA only approves around 20 new chemical entities per year.

The difficulty and cost is the reason why pharmaceutical companies tend to target diseases that – if approved – there will definitely be a market for. Diseases of the developed world, to classify them broadly: coronary artery disease, stroke, lung cancers, etc. What then, for orphan and rare tropical diseases?

sean chief editor

Sean is the Chief Editor at TSC. When he isn’t busy writing science he mixes chemicals for Merck. Or was it the other way round…?



  1. Dickson, M., & Gagnon, J. P. (2004). Key factors in the rising cost of new drug discovery and development. Nature reviews Drug discovery, 3(5), 417.
  2. Wong, C. H., Siah, K. W., & Lo, A. W. (2018). Estimation of clinical trial success rates and related parameters. Biostatistics2018.
  3. Mestre-Ferrandiz, J., Sussex, J., & Towse, A. (2012). The R&D cost of a new medicine. Monographs.
  4. Paul, S. M., Mytelka, D. S., Dunwiddie, C. T., Persinger, C. C., Munos, B. H., Lindborg, S. R., & Schacht, A. L. (2010). How to improve R&D productivity: the pharmaceutical industry’s grand challenge. Nature reviews Drug discovery, 9(3), 203.
  5. Adams, C. P., & Brantner, V. V. (2006). Estimating the cost of new drug development: is it really $802 million?. Health affairs, 25(2), 420-428.
  6. Kola, I., & Landis, J. (2004). Can the pharmaceutical industry reduce attrition rates?. Nature reviews Drug discovery, 3(8), 711.