How much does drug development cost?

The short answer is that a successful new drug usually costs around 1 billion US dollars to develop when failed programs and capital costs are counted. But the honest answer is a range, not a point estimate.

Direct spending on one successful program can be much lower. The large headline numbers fold in the cost of candidates that failed, years of capital tied up before launch, and the scope of R&D counted by the study.

How much does it cost to develop a new drug?

A defensible current estimate is about 700 million to 1.3 billion US dollars for a typical approved new drug after adjusting for failed development programs and capital costs, while published capitalized estimates range from 161 million to 4.54 billion US dollars.

The range is wide because studies are measuring different things. Some include drug discovery, preclinical work, failed compounds, and capital costs. Others rely on public company disclosures, clinical-trial activity, or proprietary industry surveys.^{[1][2][3][4][5]}

Sources: Schlander et al., Wouters et al., DiMasi et al., Mulcahy et al., and Deloitte.^{[1][2][3][5][12]}

The median is often more useful than the mean. In the 2025 JAMA Network Open study, the adjusted mean was USD 1.31 billion, but excluding just two unusually expensive drugs lowered the mean to USD 950 million. The median stayed closer to the typical case.^[5]

What is the cost of drug development by phase?

At the individual-study level, average clinical trial costs rise from about USD 4 million in Phase 1 to about USD 13 million in Phase 2 and about USD 20 million in Phase 3, but those are trial costs, not the full cost of an approved drug.

Phase costs are easy to misread. A drug may run more than one trial in a phase, and the cost per approved drug also has to account for failed candidates that never reach approval.

Sources: FDA clinical-phase descriptions, ASPE's clinical-trial cost model, and the 2024 JAMA Network Open cost model.^[6][7][4]

Clinical development is the largest direct cash category. Across all therapeutic areas in the 2024 JAMA Network Open model, clinical work represented 68% of direct cost. After failure and capital adjustments, nonclinical work rose to 40.2% of expected capitalized cost and clinical work accounted for 53.0%.^[4]

Late pivotal trials can be much cheaper or much more expensive than the Phase 3 average. A 2018 JAMA Internal Medicine study of pivotal trials supporting FDA approvals found a median estimated cost of USD 19 million, with an interquartile range of USD 12.2 million to USD 33.1 million; the highest estimated trial cost was USD 346.8 million.^[8]

How much does it cost to develop a generic drug or biosimilar?

A simple small-molecule generic can cost only a few million dollars to develop, while a biosimilar usually costs hundreds of millions because it still requires extensive analytical, manufacturing, clinical, legal, and launch work.

Generics are cheaper because they do not repeat the full new-drug efficacy program. They usually show pharmaceutical equivalence and bioequivalence to an already approved reference drug. Biosimilars are different: biologic products are harder to characterize and often need pharmacokinetic, pharmacodynamic, immunogenicity, and sometimes comparative efficacy evidence.

Sources: HHS/ASPE generic and biosimilar reports.^[9][10]

For biosimilars, clinical studies dominate the budget. In the ASPE model, the PK/PD similarity and comparative efficacy stages together accounted for 69% to 72% of total biosimilar development cost, depending on reference-product market size.^[10]

How long does drug development take, and why do estimates differ?

New-drug development commonly takes about a decade from laboratory work to approval, with several months in Phase 1, up to 2 years in Phase 2, 1 to 4 years in Phase 3, and additional time for review.

The full timeline is longer than the clinical phases alone. ASPE describes a 10- to 15-year path from laboratory work to the pharmacy shelf. FDA's phase descriptions show why the clinical part alone can take years: each phase expands the patient population, evidence burden, and safety database.^[7][6]

Cost estimates differ for five main reasons:

• Cash cost versus capitalized cost. Capitalized estimates add the time value of money before launch.
• Successful programs versus all attempted programs. Failure-adjusted estimates spread failed-candidate spending across the drugs that reach approval.
• Preclinical scope. Discovery and preclinical work are hard to allocate because many compounds never enter human testing.
• Product mix. Oncology, rare disease, chronic disease, biologic, gene therapy, and small-molecule programs have different trial sizes and success rates.
• Data source. Studies based on public disclosures, vendor trial-cost data, confidential company surveys, or top-20 pharma cohorts answer different versions of the question.

That is why the same year can produce different answers. Deloitte's 2022 industry ROI series reported USD 2.284 billion per asset for its analyzed cohort, while transparent academic studies using different data put central estimates closer to USD 879 million to USD 1.31 billion.^[11][4][5]

At the industry level, the numbers are much larger. The Congressional Budget Office estimated that the pharmaceutical industry spent USD 83 billion on R&D in 2019, about 10 times its annual 1980s level after inflation. Deloitte reported that the 20 companies it analyzed spent USD 139 billion on R&D in 2022.^[13][11]

Product-specific searches need extra caution. For example, public reporting around Zolgensma often discusses its launch price or Novartis's AveXis acquisition, but those are not the same thing as the drug's development cost. Unless a sponsor discloses project-level R&D spending, the product-specific development cost is usually not public.^[14]

ProteinIQ. "How much does drug development cost?" Updated July 1, 2026. Accessed [your access date]. https://proteiniq.io/guides/drug-development-cost

Sources▼

1. How Much Does It Cost to Research and Develop a New Drug? A Systematic Review and Assessment PharmacoEconomics · 2021. https://link.springer.com/article/10.1007/s40273-021-01065-y
2. Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018 JAMA · 2020. https://pmc.ncbi.nlm.nih.gov/articles/PMC7054832/
3. Innovation in the pharmaceutical industry: New estimates of R&D costs Journal of Health Economics · 2016. https://doi.org/10.1016/j.jhealeco.2016.01.012
4. Costs of Drug Development and Research and Development Intensity in the US, 2000-2018 JAMA Network Open · 2024. https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2820562
5. Use of Clinical Trial Characteristics to Estimate Costs of New Drug Development JAMA Network Open · 2025. https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2828689
6. Step 3: Clinical Research U.S. Food and Drug Administration · July 1, 2026. https://www.fda.gov/patients/drug-development-process/step-3-clinical-research
7. Examination of Clinical Trial Costs and Barriers for Drug Development HHS Office of the Assistant Secretary for Planning and Evaluation · 2014. https://aspe.hhs.gov/reports/examination-clinical-trial-costs-barriers-drug-development
8. Estimated Costs of Pivotal Trials for Novel Therapeutic Agents Approved by the US Food and Drug Administration, 2015-2016 JAMA Internal Medicine · 2018. https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2702287
9. Cost of Generic Drug Development and Approval HHS Office of the Assistant Secretary for Planning and Evaluation · 2022. https://aspe.hhs.gov/reports/cost-generic-drugs
10. U.S. Biosimilar Market Entry Challenges and Facilitating Factors HHS Office of the Assistant Secretary for Planning and Evaluation · 2025. https://aspe.hhs.gov/sites/default/files/documents/2d5c0a194c180b52d1c760d3bb09f70a/Biosimilars%20Final%20Report_250825_v508.pdf
11. Measuring the return from pharmaceutical innovation 2022 Deloitte · 2023. https://www.deloitte.com/uk/en/Industries/life-sciences-health-care/research/measuring-return-from-pharmaceutical-innovation-2022.html
12. Navigating the GLP-1 boom Deloitte · 2026. https://www.deloitte.com/us/en/industries/life-sciences-health-care/perspectives/navigating-the-glp-boom.html
13. Research and Development in the Pharmaceutical Industry Congressional Budget Office · 2021. https://www.cbo.gov/publication/57126
14. What a $2 Million Per Dose Gene Therapy Reveals About Drug Pricing ProPublica · 2025. https://www.propublica.org/article/zolgensma-sma-novartis-drug-prices-gene-therapy-avexis