Analytical Framework for Examining the Value of Antibacterial Products. 3.2.6 Costs of Supply Chain Activities


The drug sponsor needs to undertake a variety of additional activities concurrently with clinical development, including sample preparation, process research, process development, process design, and plant design and construction.  As was depicted in Figure 1, sponsors initially need to focus on preparing sufficient amount of drug sample for use in animal and human studies.  Depending on the active ingredient(s), this could cost from $3,500 to over $80,000 per kilogram according to some experts.  Upon start of clinical research, the focus shifts to developing a process for commercialization.  This includes a pilot facility that provides data for plant design and larger quantities of drug samples for Phase 3 trials.  While Phase 3 is ongoing, the sponsor usually begins plant design or starts investigating other arrangements (e.g., contract facilities, licensing, etc.) for manufacturing the drug.  Because of significant failure rates in late stage clinical trials, sponsors often cannot commit themselves to building a manufacturing plant until they are certain of the product’s commercialization success.  Thus, typically upon successful completion of Phase 3 trials, plans are launched to build a new manufacturing facility or modify existing facilities. 

Table 9 below presents the cost estimates for each of these supply chain activities as available from Blau et al. (2004).  The figures are based on historical information on nine new drug candidates provided by a large pharmaceutical company to the study authors.  We use the reported estimates in our model by inflating the 2004 dollar figures to 2012 dollars with the CPI inflator.

Table 9: Product Supply Chain Activity Costs (in 2012 $ million) as Available from (Blaue, Pekny, Varma, & Bunch, 2004) [a]

Parameter Min Mean Max Comment
Sample preparation for animal/human studies $2.4 $2.7 $2.9 Assumes that out-of-pocket costs for the activity are evenly distributed across all clinical phases.
Process research/development/design $18.7 $26.8 $34.8 Assumes that out-of-pocket costs for the activity are evenly distributed across Phases 1 and 2
Plant design $10.7 $13.4 $16.1 Assumes that 75% of out-of-pocket costs for the activity are spent during Phase 3 and the remaining 25% during the NDA/BLA submission/approval phase.
Plant build $69.6 $83.0 $96.3 Assumes that out-of-pocket costs for the activity are expended during the NDA/BLA submission/approval phase.


[a] Authors’ figures are inflated to 2012 dollars using the CPI inflator.

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