According to a new estimate by the UK’s Office of Health Economics based on 2002 and 2003 confidential CMRI surveys, the average R&D cost of a medicine is $1.5 billion (in 2011 prices). The four primary variables affecting the cost are out-of-pocket costs, success rates, development times and cost of capital. The cost of capital accounts for 33% of the total. The average cost per drug development interval was calculated to be: $6.5 million for first toxicity dose to first human dose, $16.0 million for first human dose to first patient dose, $53.9 million for first patient dose to first pivotal dose, $129.3 million for first pivotal dose to first core submission, and $29.0 million for first core submission to first core launch. The percentage of the $1.5 billion in capitalized cost was estimated to be, by interval, 12%, 19%, 33%, 20% and 2%, respectively, and 14% for pre-1 toxicity dose. The success rate per interval was calculated to be 70%, 63%, 31%, 63% and 87%, respectively. The average R&D time per new medicine was determined to be 11.5 years.

Source: UK Office of Health Economics