The average cost for a Big Pharma to develop a drug in 2024 was $2.23 billion, up from $2.12 billion the year before.
The data come from 20 pharmas that had the highest R&D budgets in 2020, as reported in Deloitte’s annual report, “Measuring the return from pharmaceutical innovation.”
In 2024, the average cost per asset jumped for 12 of the 20 companies analyzed. While costs of pharma R&D continue to rise year over year, the cohort has reduced its increase in spend to a compound annual growth rate of 6.44%. This is compared to 7.69% from 2013 to 2020 and reflects Big Pharma’s focus on boosting efficiency for R&D spend, according to the analyst firm.
Deloitte attributed the rising R&D costs to five factors: increases in trial times, more intricate and complex research areas, macroeconomic factors, tech advancements and high attrition rates; the pharma cohort spent $7.7 billion on trials for candidates that were terminated in 2024, according to the analysis.
While R&D costs are up, so is the projected return on investment. For pharma R&D, the expected ROI was 5.9% in 2024, up from 2023’s 4.1%.
Of note is the role that GLP-1 therapies played in that increase, with the average return dropping to 3.8% when the drug class is excluded.
Per asset, the average forecast peak sales was $510 million across the 20 pharmas. However, that average plummets to $370 million when GLP-1s are taken out of the equation.
GLP-1s have also heavily influenced the cohort’s internal rate of return for late-stage pipeline assets, which increased from 2023’s 4.3% to 5.9% in 2024. When GLP-1s are removed, 2024’s rate drops to 3.8% and 2023’s declines to 3.4%.
Another influence on the pharma industry’s elevated internal return rate is the resurgence of potential blockbusters in the late-stage pipeline and increased commercial forecasts for assets after positive trial outcomes, according to Deloitte.
In 2024, 29 potential blockbuster assets entered late-stage development and accounted for 14% of all new products. This is a 53% jump from the 19 new blockbuster assets in 2023.
To gain a competitive edge and accelerate innovation for patients, Deloitte advised pharmas to diversify their portfolios and build expertise in less saturated therapy areas.
“While targeting areas of unmet need inherently involves greater complexity and risk than incremental improvements on launched drugs and are more time consuming both in development and through regulatory approval, the rewards for companies bold enough to pursue them can be substantial, both financially and in terms of improving global health outcomes,” according to the firm.