Project-level cost studies

This project-level approach was used in a pair of studies pioneered by Ronald Hansen (175) and updated and extended by Joseph DiMasi and colleagues (109). The frequent contention by industry spokesmen that it costs 231 million (in 1987 constant dollars) to bring an NCE to market (326) is the central result of the DiMasi study (109). In 1990 constant dollars, the cost would be 259 million.10... 

Two major approaches have been used to estimate the cost of bringing new drugs to market. One approach examines project-level data acquired from pharmaceutical firms. The second approach analyzes R D expenditures and new products at the industry level. Table 3-1 contains a summary of selected pharmaceutical R D cost studies of both kinds—project-level and industry-level—listed in the order of the R D period studied. 

Project-level studies try to measure costs incurred at each stage of development and the percent of drugs that will successfully pass each stage, and then use these calculations to arrive at a final cost estimate. The key advantage of the project-level approach is that, if sufficiently... 

The prototype of project-level R D cost estimation is a pair of studies published by Hansen in 1979 and DiMasi and colleagues in 1991 (109,175). They used very similar methods and data sources to estimate the present value in the year of U.S. market approval of the costs of discovering and developing NCEs. The results of these studies have been used to estimate net returns to R D and to estimate recent changes in the cost of developing new drugs. 

The assessment of validity of the methods concentrates on the project-level studies of Hansen (175) and DiMasi (109) for two reasons. First, the DiMasi study offers the most recent estimate which industry representatives and others have quoted widely as the definitive estimate of research costs (325). Second, the other studies based on aggregate R D expenditures draw from the project-level analyses of Hansen and DiMasi for estimates of the time profile of development and are therefore partially dependent on them. 

The estimates of R D cash outlays and capitalized costs in the project-level studies are imprecise and potentially biased, but the magnitude and net direction of these errors cannot be predicted. Therefore, OTA looked for estimates of R D costs from independent data sources to provide... 

OTA attempted to corroborate the estimates of R D costs with two approaches. First, the industry-level studies reviewed in the previous section produced independent estimates of R D cash outlays per success. The consistency of these studies findings on cash outlays with those of the project-level studies is examined below. Second, data on trends in important components of R D costs are examined to determine whether they are consistent with the rapid rise in real cash outlays implied by the two project-level studies of R D costs. 

In 1998, DSTO supported the Project Definition Study (PDS) (Phase 2) for Land 125 (Hobbs and Chalmers, 2003) to further refine the project scope and to develop the supporting data to allow higher-level cost-benefit tradeoffs to be made. The DSTO recommendation in 1998 was not to acquire an Integrated Soldier System, as the technology was not considered sufficiently advanced. The report proposed a preferred path for SCS development as an incremental development involving a number of model-test-model cycles in order to fully understand the requirements for an optimised soldier combat system prior to Phase 3 of the project. 

Based on this study (I), water costs were projected to 1972. It was concluded that the cost of water can be reduced from the present level of about 38 cents per thousand gallons (see Figure 7) to the range of 24 to 31 cents. Such a reduction would depend upon the extent of improvements that can be made in the next decade in heat transfer coefficients, in operation at higher temperatures as the result of improvements... 

The second phase is the feasibility study. This stage may require the expenditure of 1 to 2% of the total project cost. Thus for a 1,000 million project about 20 million will be required. This will define the location, feedstock and product market and the technology to be used. It will also typically encompass outline regulatory approval and assessment of environmental impacts. The error in the estimate is typically not less than about +/-10%. Financiers (bankers and corporate boards) like the error to be +1-5%. This level of estimate can usually only be achieved by a FEED study. 

The latest and most convincing economic study is available from the Asheville Project. In patients with diabetes who received ongoing pharmaceutical care services, not only were improvements maintained in hemoglobin AlC levels over the 5-year study time frame, but also days of sick time decreased every year and estimated increases in productivity were 18,000 annually. In addition, total mean direct medical costs in the Asheville project decreased by 1200 to 1872 per patient per year compared with the baseline. ... 

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