There are plenty of 50-100M pharma startups; they wouldn’t exist if your number was right.

Isn't there a selection bias in that the startups that got to 50-100M survived because they were lucky with a candidate treatment. The ones that failed were the ones that never found a candidate in time? The difference being that large pharmaceutical companies have to swallow ALL the failures, whereas startups can "just" die.

Not to say that pharma companies don't have some fat that can be trimmed...

How do you account for the failed attempts?

As yomly alludes to, pharma startups exist because they don't own the risk - their investors bought it when they were funded. Big pharma does own the risk.

A company that is spun out from a PhD project in a research group, that has done a lot of the groundwork on grants will need less funding

Same goes for a start-up that for instance make non-invasive assays for diagnosis, since the documentation requirements are lower for such products

Producing something that has to be injected into humans is an entirely different league, since the amount of documentation required for such products is staggering

The cost for marketing will vary significantly depending on your definition of the word, and I suspect that it might be misconstrued as only being "commercials and paid holidays for doctors"

GP said idea to product costs 1B just for r&d. That and 1B amortized over failures (and including marketing) cannot be true at the same time unless there are no failed attempts and unless marketing cost is zero.

I'm also not sure what you would define as a failure. Drug development often starts with several candidates for a target. Over the cause of development the list is trimmed, as candidates show lack of affinity for the target or have side-effects that make them unviable. Would you consider each of the excluded candidates a failure?

I don't get to define that, companies do, but basically it includes everything that does not involve a lab, technician, doctor, nurse, statistician/programmer, etc. The US and the rest of the world are quite different here - if you've ever watched US broadcast in the evening, you'd see TONS of ads for prescription only medicine ("suffering from foo? Ask your doctor about bar"); that's marketing. Taking three hundred cardiologists on an all-expenses-paid 7-day cruise with one 30-minute "purely informative lecture about our new drug" and 7 days of fun? That's marketing too. Lobbying to congress? That's also marketing.

Outside of the US, the marketing budgets are smaller and less overt - but the cruise-style legal bribe-like events are prevalent everywhere.

> Would you consider each of the excluded candidates a failure?

Possibly. You've described one style, but it's not the only one. Many times, it's a weird result from some other research (how Viagra was discovered, how DCA tests were started).

But many things are essentially complete and utter failures - you have a line of research where no viable compound was found at all. BiondVax just failed a 15-year mission trying to develop a universal flu vaccine. Remdesivir is essentially failed even though it is FDA approved (It failed for Ebola; if you look at the data critically, it failed for SARS-COV-2 -- which the WHO's recent studies show even more clearly).

There is some benefit from this research - new techniques, often new devices - but the drug itself is a failure in the sense that it will not generate any income to the company.

Edit: just saw your earlier comment about marketing. It is those things (which you and I mentioned) and a lot more, but it is basically for the company to define in their books and a rule of the thumb would be “an expense a university department developing this to completion without expectation of profit would not have to spend”

Not this year!

This doesn't apply so much to Covid vaccines, as the time frame is accelerated and demand is already high.

There's so many ways to calculate the cost, that I think it's more important to be aware of the assumptions made for the estimate, than the number itself (which I also failed to do in my original answer)

I think people underestimate the cost of drug development, because the numbers are so big, that it doesn't seem realistic for companies to survive

Pfizer’s trial will run for 2 years, so ~$900M for the trial alone. That’s excluding all the work to scale up the production, regulatory filing, distribution, etc.

Edit: my math sucks. $900M, not $90M

I just think big pharma are fundamentally ok with huge cost for trials and are not motivated to decrease it/make it more efficient, since they're ok with their pie being larger. They will just shift costs to healthcare system and will be happy with larger profit.

Now, $10-15k per patient-year is for a typical therapeutic. And that is an average across global trial sites, not just the US. It’s not much money. You go a 15 min doctors appointment and your insurance is billed $150. Now imagine going 1 per week and having multiple tests run each time. Or having to stay in the hospital for a day when the drug is administered. You can burn through $1,000 per month pretty damn quickly.

It doesn't work this way. Pricing of pharmaceuticals is independent of the cost of development. Nobody will pay $200 per Covid vaccine dose just because the cost to develop it went up 10x. Every extra dollar spent on development, is one less dollar of profit.

That's why some drugs never make it to market - the cost to bring them to market and the low price means they'll never be profitable.

Given the amount of work being done by this and other research labs hired Astrazeneca, and comparing this to quotes I've received for a very modest UX usability studies, it's hard to see see this an sort of money grab.