Phase 0

During this phase, researchers try to answer the question of “Does the medical product behave in humans the way we think is beneficial?”

Phase 0 studies are small, exploratory trials designed to answer narrow questions about how the human body handles the drug in tiny doses with limited exposure.

These early trials are not meant to treat disease. Instead, they’re meant to reduce some of your uncertainty before expensive trials begin. The FDA allows exploratory investigative new drug (IND) approaches and these Phase 0 trials permit limited human exposure under an IND framework.

Phase 0 can be comparatively inexpensive when you compare it to later phases, but the amount you spend varies widely depending on your use of assays, any specialized imaging, and site capabilities.

Phase 1

During this phase, researchers try to answer the question of “Is the drug safe enough for people to take it, and what dosage makes sense?”

Phase 1 is your initial introduction of an investigational drug into humans, typically emphasizing safety, tolerability, dosage range, and how the drug is metabolized. Regulations describing Phase 1 highlight the focus on pharmacologic actions, any negative side effects at increasing doses, and early evidence of effectiveness when possible.

The average cost for direct daily operations was reported by a Tufts CSDD analysis as the estimated Phase I direct cost per day of approx. $7,829.

The average out-of-pocket industry cost per drug was reported in an analysis comparing the National Institute of Health (NIH) and industry spending. Phase 1 costs per drug were estimated at approx. $54.9M.

Phase 2

During this phase, researchers try to answer the question of “Does it work in patients, and what dose/regimen should we use?”

Phase 2 shifts into you working with patients who have the condition and your focus is on effectiveness and safety. FDA definitions describe Phase 2 as your controlled studies to evaluate effectiveness for a certain indication and determine common short-term side effects in your trial subjects and risks.

Average cost for direct daily operations is from Tufts CSDD estimated Phase II direct cost per day at approx. $23,737. Average industry Phase 2 costs per drug were estimated at approx. $103.6M.

Phase 3

During this phase, researchers try to answer the question of “Can we confirm benefits, compare fairly, and collect data about the bigger safety picture?”

Phase 3 is when you confirm everything with a large trial intended to establish your drug’s efficacy (effectiveness) and monitor adverse (bad) reactions across broader populations when many people are taking your new drug for a longer time.

The FDA’s patient-facing drug development overview describes Phase 3 as designed to demonstrate whether your product offers benefit for a specific population. This phase of clinical trials typically involves hundreds to thousands of participants.

Average cost for direct daily operations is from Tufts CSDD analysis of your estimated Phase III direct cost per day at approx. $55,716. Average industry Phase 3 costs per drug were estimated at approx. $298.3M.

Phase 4

During this phase, researchers try to answer the question of “What happens in the real world after approval?”

Phase 4 includes your after-marketing studies and monitoring for you to learn about longer-term safety, rare adverse effects, and optimal use in broader real-world populations. FDA describes your post-marketing trials as studies you conduct after approval to gather additional information about safety, efficacy, and optimal dosage.

The average cost for direct daily operations is from Tufts CSDD analysis of your estimated Phase III direct cost per day at approx. $14,091. None of these Tufts CSDD cost estimates include any losses from failed drug candidates or capital expenses.

What Average Cost Really Means

Be aware that when reading about industry-wide averages that you’ll see cost estimates reported in different ways:

• Per-day operating cost
• Per-trial cost
• Per-drug / portfolio cost by phase

So, it’s normal for credible sources to report different averages because they’re measuring different things.

Drug development cost estimates rise dramatically once you account for the reality that many drugs don’t make it to approval. One economic evaluation estimated mean development cost per drug at $172.7M, increasing to $515.8M when failures were included and to $879.3M when failures and capital costs were included.

That’s why your later-phase failures are such a financial disaster. They’re not just your study didn’t work; they’re a major sunk-cost.