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Drug development – The challenges

Biostock Article Series Drug Development Part 2

Drug development – The challenges

5 January, 2023

In the first part of BioStock’s article series on drug development, we learnt about the different steps in the long journey from the discovery of a new substance to a fully developed drug reaching the market. In this second article, we highlight the challenges that a drug development company faces, and how they can differ depending on the therapeutic focus.  

Developing a new drug includes substance discovery, preclinical and clinical development, and the associated regulatory processes. If everything goes according to plan, and the drug developer has sufficient evidence of its candidate’s safety and efficacy, an application for regulatory approval is submitted to the relevant authorities in each geographical region – for example, the FDA in the US and the EMA in Europe.

Read also:
Drug development part I – The four phases
Drug development part III – A regulatory obstacle course
Drug development part IV – Making treatments available
Drug development part V – The success of orphan drugs

Regulatory guidelines set high standards

Obtaining regulatory approval for each development step requires adherence to strict guidelines and high standards (GVP, GLP, etc.), not least regarding the safety and efficacy of the drug candidate. The rigorous regulatory framework naturally makes the development process complex, at the same time the framework exists to ensure that the development process is safe. The challenge of achieving the high regulatory requirements contributes significantly to two other challenges – namely the time and cost burdens associated with drug development.  

Cost – the greatest challenge

In addition to the long times associated with drug discovery and development, already discussed in the first article of this series, the single biggest challenge within drug development is cost. 

A study by Wouters et al. published in JAMA in 2020 estimated the median cost of developing a new drug at USD 985 million. The study included data for 63 drugs approved by the FDA between 2009 and 2018, most of which received market approval between 2014 and 2018. The data mainly concerned drugs developed by smaller companies, orphan drugs (drugs targeting rare diseases) and First-in-Class drugs (drugs with a new or unique mechanism of action).  

The same study also shows that costs differ between different therapeutic areas. For example, the median cost of developing a drug in neurological indications was estimated at USD 766 million, while the corresponding price tag for oncology and immunological drugs was USD 2,772 million. This is because a larger proportion of oncology and immunological drug projects fail before they reach the market.


Data from “Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009–2018,” JAMA 

The JAMA study can be set in relation to a previous study by DiMasi et al.  which examined the development costs of 106 new drugs developed by ten major pharmaceutical companies. The researchers concluded that the average cost of drug development amounted to USD 2.8 billion, i.e. in the same vein as the price of developing oncology and immunological drugs according to Wouters et al. It is likely that the higher cost estimate reflects the fact that the global pharmaceutical companies have the opportunity to perform larger and more costly clinical studies as compared to smaller companies, which also generates more robust data regarding safety and efficacy. 

Orphan drug development – a more accessible path to market

Orphan drug development is commonly regarded as less challenging because the process is cheaper and faster than that of non-orphan drugs. A study by Jayasundara et al. took a closer look at this and determined that the cost of developing an orphan drug was indeed lower, but that the development process was significantly longer. This can likely be attributed to the limited patient population. Clinical studies with orphan drugs, which are developed for rare diseases, may be allowed to include fewer patients, making them less costly. However, because of the rare nature of such diseases, patient recruitment becomes a challenge.

Few drugs make it all the way to market

Looking at the risks associated with drug development, success rates in the clinic tell a gloomy story. The book Biotech Valuation: A playbook for dealmakers by Thornblad & Carlsson shows that the likelihood of reaching market approval – or Likelihood of approval (LoA) – is only 12 per cent for drug projects that are in phase I.  

The figure rises to 18.8 per cent in phase II and 55.1 per cent in phase III. In addition to the figures being a clear indication of how uncertain the outcome of each study step is, they also tell us that half of all candidates in phase III do not achieve regulatory approval. The reported numbers illustrate the significant risk associated with drug development.

In this context, it is also worth noting that not even all regulatory-approved drugs reach market launch. In fact, a whopping 15 per cent of approved drugs do not. This is because, despite a positive safety and effectiveness evaluation by the authorities, a new drug must also fit into the care chain and be in demand by the profession. Another potential obstacle is the fight for market control by competitors – if a new drug is deemed as a threat by a competitor, it will be bought and then immediately scrapped before it can go into commercialisation.

More challenges in short

Yet another challenge in drug development is patient recruitment. Recruiting enough patients – and thus generating statistically significant data – is both very time-consuming and costly. In addition, there are several other factors that affect the time and cost of drug development, such as the design of clinical studies, choice of drug formulation, outcome measures and data analysis.  

As outlined in this article, putting a new drug on the market is far from easy – the challenges seem endless, and we have only just scratched the surface of one key obstacle – the strict regulatory framework that pharmaceutical companies are forced to follow. This will be covered in the next saga of this drug development series.

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