By Donald Zuhn —

Last week, Forbes reported that the development costs for an average drug (produced by a major pharmaceutical company) are at least $4 billion, and as much as $11 billion ("The Truly Staggering Cost Of Inventing New Drugs").  The article, by Forbes science and medicine writer Matthew Herper, notes that the drug industry pegs average drug development costs at $1 billion, and that Bernard Munos of the InnoThink Center for Research In Biomedical Innovation, adjusting for current failure rates, arrives at an estimate of $4 billion.  Seeking a more rigorous estimate, Mr. Herper and Forbes writer Scott DeCarlo combined Mr. Munos’ drug approval counts with the research and development spending for a dozen major pharmaceutical companies, as reported in annual earnings filings over the past fifteen years (pulled from a Thomson Reuters database using FactSet), and adjusted the resulting figures for inflation.  Their calculations showed that of the twelve pharma companies, AstraZeneca spent the most R&D money per approved drug (nearly $11.8 billion) and Amgen spent the least (almost $3.7 billion).  The other companies on Forbes' list were Novartis, Bristol-Myers Squibb, Merck, Abbott Laboratories, Eli Lilly, Johnson & Johnson, Pfizer, Roche, Sanofi, and GlaxoSmithKline.  The number of drug approvals, R&D spending per drug approval, and total R&D spending for each of the above companies can be found in the Forbes article.