The Drug Development Process

The drug development process is the process of bringing a new pharmaceutical drug to the market.

This includes pre-clinical research on microorganisms and animals, filing for regulatory status to initiate clinical trials on humans, and obtaining regulatory approval with a new drug application to market the drug.

In accordance to the U.S. FDA, the drug development process involves five steps:

  1. Discovery and Development
  2. Preclinical Research
  3. Clinical Research (IND, Phase 1, 2, and 3)
  4. FDA Review (NDA)
  5. FDA Post-Market Safety Monitoring

On The Tufts Center for the Study of Drug Development published a study in the Journal of Health Economics, which stated that the cost of drug development had increased to nearly $2.6 billion.

Factors affecting drug costs include:

Observations of the running ($USD) dollar figures are based on assumptions of key metrics:

For reference, here is the link to the excel model that was used to make the estimates. For simplicity, adjust the cost of capital below to see it effect on the total cost:

Step 1: Discovery and Development

Research for a new drug begins in the laboratory.





$539.9 million
(22%)

Step 2: Preclinical Research

Drugs undergo laboratory and animal testing to answer basic questions about safety.





$290.5 million
(33%)

Step 3: Clinical Research

Drugs are tested on people to make sure they are safe and effective.





$1,701 million
(99%)

Step 4: FDA Review

FDA review teams thoroughly examine all of the submitted data related to the drug or device and make a decision to approve or not to approve it.





$13.4 million
(100%)

Step 5: FDA Post-Market Safety Monitoring

In the U.S. the FDA monitors all drug and device safety once products are available for use by the public.





$2,544.8 million
(100%)