New Drug Development:

Estimating entry from human clinical trials

Christopher P. Adams & Van V. Brantner∗

Bureau of Economics

Federal Trade Commission

July 7, 2003

Abstract

This paper analyses a detailed data set on drugs in human clinical trials around the world between 1989 and 

2002. The data provides information on the probabilities with which drugs successfully complete the 

different phases of the trials and the durations of successful completions. The paper shows that success 

rates and durations can vary substantially across observable characteristics of the drugs, including primary 

indication, originating company, route of administration and chemistry. It suggests that analysis of this type 

of data can help us to answer questions such as: Do AIDS drugs get to market faster? Do Biotech drugs 

have higher probabilities of getting to market?This paper provides some general statistics for analyzing these 

questions.

 

∗

 The authors would like to thank Pharmaprojects for allowing us to use this data. We would also like to thank our 

colleagues including Rosa Abrantes-Metz, Kristy Huff, Fahad Kajani, Roy Levy, Albert Metz, Morris Morkre, 

Elizabeth Schnierov, and Bill Vogt, two anonymous reviewers, as well as our management including Denis Breen, Dan 

Hosken, Pauline Ippolito and Michael Vita. This paper does not necessarily represent the views of the Commission 

or any individual Commissioner. All our errors are our own. Email: cadams@ftc.gov, web: 

http://www.together.net/~cadams.
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I. Introduction

The dynamics of drug development is one of the defining characteristics of the pharmaceutical industry. 

Despite its importance to the industry, there is little information on how long it takes for particular drugs to 

go through human clinical trials and the probabilities of successful completion. Recently, a number of authors 

have started making use of historical data on the development of drugs through human clinical trials in the 

US and elsewhere in the world (for example, Abrantes-Metz, 2003, Kyle, 2002, Danzon et al, 2003). 

These authors are using this data examine determine the relationship between drug characteristics and 

successful durations, market entry, and the use of licensing arrangements, respectively. This type of 

historical data has the potential to provide industry analysts with a much clearer picture of late stage 

pharmaceutical development and new drug entry. The current paper presents some summary statistics on 

duration and frequencies of successful completion of the human clinical trials. While this analysis is not 

sophisticated or detailed enough to provide answers to many of the questions researchers and practitioners

are interested in, it does provided readers with some stylized facts to guide future work.

The paper analyzes a sample of drugs that have entered human clinical trials somewhere in the world 

between 1989 and 2002. The data provides information on entry and exit dates from the three different 

stages of the human clinical trials for the first indication that the drug was being developed (post-1989). The 

data also provides information on drug characteristics such as primary indication, chemical composition, 

route of administration and originating company. The analysis provides frequencies with which drugs with 

different characteristics successfully complete the different stages of the human clinical trials. For example, 

drugs that have been originally developed by one of the 10 largest drug companies have a higher than 

average probability of getting to market. The analysis also provides mean durations for drugs that 

successfully complete the different stages of the human clinical trials. For example, AIDS drugs are in 

human clinical trials for an average of 5 years, which is 3 years shorter than the average drug in the sample. 

In general, the results presented should not be interpreted as causal effects of drug characteristics on 

success rates or successful durations. Rather these results should be interpreted as central tendencies or 

simply as statistical observations of the drug development process.
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Analysis of drug development and new drug entry must address four major questions. First, do 

“important” new drugs get through the regulatory process quicker than other drugs? In the US, the FDA 

offers a number of programs aimed to encourage development of important life-saving drugs, including 

prioritizing drugs at registration and offering fast tracks through human clinical trials and registration for 

specified drugs (particularly AIDS drugs). According to the FDA, priority drugs that successfully complete 

the review process have significantly shorter durations than standard drugs (FDA, 2003). Dranove and 

Metzler (1994) analyze the FDA's role in drug development durations by analyzing successful duration from 

discovery to market for US drugs. The authors find that economic indicators seem to be more important in 

determining durations than “scientific” indicators. This paper and Abrantes-Metz (2003) use more detailed 

data on the durations and failure rates for drugs in human clinical trials. This paper analyses successful 

durations through human clinical trials and the governmental review process by primary indication and finds 

significant differences across different indications. In particular, AIDS drugs and cancer drugs tend to have 

shorter successful durations. Note that these results should be interpreted with care, as the drugs analyzed 

are going through different regulatory environments throughout the world.

1

 Note also that we have not 

controlled for the actions of the drug companies and their ability to determine success rates and durations.

Second, are there economies of scale or scope in drug development? Graves and Langowitz 

(1993) find a positive relationship between R&D expenditures and the number of new chemical entities 

produced. In their analysis of ten large pharmaceutical firms, Henderson and Cockburn (1996) find a 

similar relationship between the number of new drug patents and development output. Danzon et al. (2003) 

find that success rates are increasing with the overall number of drugs the firm has in development and the 

number of drugs in the relevant therapeutic area.2 As stated above, the results presented below suggest that 

drugs discovered by larger companies have a higher probability of getting to market. However, the results 

also show substantial heterogeneity in the success rates for some of the largest firms. This heterogeneity 

suggests that firms may have different strategies for investing in drug development.3 While there may be 

 

1

See Kyle (2002) for a discussion of the differences across countries.

2 Danzon et al (2003) discuss the influence that alliances and licenses have on drug development success rates.

3

 It is interesting to consider the similarities between expenditure on new drugs and the expenditure on motion 
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advantages for larger firms in bringing drugs from discovery to market, it is not obvious that such advantages 

would be observable. For example, a larger firm may choose a strategy of investing in high risk 

“blockbuster” drugs. Such a firm may be observed to have a low probability of getting drugs to market, yet 

may be a very successful company.

Third, what effect does the drug's expected market return have on the probability of success and the 

time to market? Dranove and Metzler (1994) find that drugs with higher US and World sales have shorter 

durations to market. Kyle (2003) compares drug entry across countries and indications and finds that the 

probability of market entry is positively related to market size. DiMasi (2001) reports the results of a 

survey of drug companies that sponsored drugs through human clinical trials. The survey found that for over 

30% of the drugs, whose development was discontinued between 1981 and 1992, the sponsors cited 

“economic reasons” as the explanation for why development was discontinued. These results suggest that 

expected market return is an important determinant of success probabilities and durations. The results 

presented below show that the probability of entry tends to increase with market size, except for drugs 

destined for very large markets. It is not clear how to interpret such results. One issue is that companies do 

not randomly choose which drugs to develop, and simple risk/return analysis suggests that companies may 

try to develop drug with lower probability of getting to market if those drugs are expected to have a higher 

return. In fact, Danzon et al (2003) find that drugs with a higher expected return have a lower probability of 

getting to market and argue that this result is consistent with equilibrium behavior. The analysis presented in 

this paper is not detailed enough to account for such endogeniety issues. The results also show that drugs 

destined for larger markets tend to spend longer in development. This result seems as odds with our 

expectation; however it is again not obvious how such results should be interpreted given that durations are 

heavily influenced by the drug companies.

Fourth, how do the drug's characteristics affect success frequencies and durations? Dranove and 

Metzler (1994) have some information on how some characteristics affect durations. However, 

the data is not detailed enough to determine how characteristics affect particular phases of the human clinical 

trials. The analysis presented in DiMasi (2001) is similar to this paper, however it is done on drugs in 

 

pictures (Goettler, 2002).
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development prior to 1995. A recent change in the industry has been the introduction of biotechnology 

drugs into human clinical trials. The results show that biotech drugs tend to have higher probabilities of 

getting to market although their average durations are similar to the average durations over all drugs. The 

results also suggest significant differences between drugs with different routes of administration (ROA). 

Oral drugs seem to be quicker to market but with a lower probability of successful completion of human 

clinical trials. This result is consistent with an equilibrium story that oral drugs have higher expected returns, 

however these results are not based on a structural estimation so should be interpreted with care. For 

example, it may simply be the case that it is easier to conduct trials on oral drugs.

The paper proceeds as follows. Section II presents a brief description of the drug development 

process. Section III describes the data used in the analysis, and provides definitions of the variables used. 

Section IV presents and discusses the results. Section V concludes.

II. Human Clinical Trials

The process of drug discovery to market can be decomposed into six distinct periods. The first period is

commonly known as Preclinical. In general, after preclinical analysis, a company wishing to launch a drug 

on the US market, for example, files an Investigatory New Drug (IND) application with the FDA. If

accepted, the drug goes into human clinical trials, which has three basic phases, called Phase 1, Phase 2 and 

Phase 3 (the second, third and fourth periods, respectively). An IND may be filled for one or more phases. 

Generally, the phases are completed sequentially and after the Phase 3 trials have been completed, a 

company wishing to launch a drug on the US market will file a New Drug Application (NDA) with FDA

and move into the fifth period. A drug that passes FDA review successfully is registered in the “Orange

Book”. Once registered, the drug moves into the sixth period and the company can launch the drug on to

the US market. A similar process occurs in other countries.4

In preclinical trials, the pharmaceutical company uses genetic analysis, pharmacological tools and 

“animal models” to test for the safety and the effectiveness of the drug for particular disease indications. 

Unfortunately, because the data set analyzed below is based on information that is voluntarily given to the
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public by the drug's sponsor, the information on preclinicaltrials is not very accurate. Note that according 

to the FDA, only 1 in 1,000 drugs pass the preclinical stage and are proposed fortesting in humans (FDA, 

2002). However, almost half the R&D expenditures occur in the preclinical stage of development (Levy, 

1999) 

The first phase of the human trials is called Phase 1. Phase 1 trials are generally carried out on a 

healthy volunteer populationof between 20 and 80. According to the FDA, “These studies are designed to 

determine the metabolic and pharmacological actions ofthe drug in humans, the side effects associated with 

increasing doses, and, if possible, to gain early evidence on effectiveness” (FDA, 2003). Phase 2 trials 

involve several hundred patients with the disease condition, and are designed to give an early indication of 

the drugs effectiveness. Phase 3 trials are larger with patient numbers between several hundred and a few 

thousand, and are designed to give information on the balance between safety and effectiveness (Levy, 

1999).

III. Data

Pharmaprojects contains information on 27,987 new branded drug entities that have reached the late stage 

development from 1980 to 2002. For the purposes of this study, we limited the sample size to the 3,328

drugs that have entered either Phase I, or Phase II, or Phase III of the human clinical trials somewhere in the 

world for the first time since 1989.5 Note that information on every stage of development is available for

only a limited number of drugs. The data is based on information that is voluntarily provided by the 

pharmaceutical companies in the form of press releases and academic conferences. Table (1) in the 

appendix presents information on the number of drugs for which we have information on the different phases 

of development. Note that of the drugs for which the data 

provides information on Phase 3, just less than half have no information on the previous phases. It is thus 

necessary to be careful about interpreting results for drugs in Phase 1 and Phase 2 as there may be 

 

4

See Kyle (2003) for discussion of the differences between the drug development process in different countries.

5 Note that these trials may or may not be taken place in the U.S. under direct FDA supervision.
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substantial self-selection bias in the sample.

6

 Although not reported, the good news is that most of the 

censoring of earlier phases occurs in the earlier years of the study (prior to 1994) suggesting that the 

censoring is not necessarily related to the expected success of the drug, but related to the standard left 

censoring problem in duration data.

7

 

The length of time in each phase is determined by the time between the entry date of the particular 

phase and the entry date of the next phase. However, for Phase 3, the entry date of the next phase is the 

date on which the drug was launched somewhere in the world (for the first time). It should be noted that 

this phase explicitly includes time spent in government review after the Phase 3 clinical trials have ended. 

The measure of “success” is the probability of completing each phase of development, where successful 

completion of Phase 1 is defined as entry into Phase 2, similarly for Phase 2. For successful completion of 

Phase 3, we assume entry on to the US market.8

A number of measures are used to provide some information related to the topics discussed in the 

introduction. In relation to the drug’s importance, the major measure is the drugs indication. The indication 

of the drug is generally its “primary indication”, which is defined as the indication for which the drug is further 

along in its development. Most drugs are taken through human clinical trials for one indication prior to being 

tested for other indications. However, it should be noted that in the U.S., for example, doctors are free to 

prescribe approved drugs for any indication. Given this, it may not always be the case that the drug is 

intended for its “primary indication”. 

The measure of company size is “Big Pharma”. A drug is categorized as either being originally 

developed by a big pharma firm or a non-big pharma firm. The drug’s firm is a big pharma firm if the 

 

6

 We may therefore expect to see that the drugs in the sample have a higher probability of getting to market than the 

average drug which enters the particular phase.

7

 In general data from any particular time interval is going to have a “left” censoring and “right” censoring problem. 

Left censoring refers to the fact that some durations began prior to the beginning of the sample period. Similarly, 

right censoring refers to durations that end after the end of the sample period. In this case the interval is a lot larger 

than the average duration for each phase, meaning that the censoring shouldn’t be too large of a concern for the 

phase duration statistics.

8

 We are assuming that the objective of every drug is to be launched on the US market, which may be overstating 

things and thus we are including drugs that have no intention of going to the US market thus biasing the 

probabilities downwards.
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company’s world revenue for 2001 was one of the top ten in the pharmaceutical industry. One concern 

with using a measure of revenue is that it is endogenously determined, with successful drugs getting to 

market and creating revenue for the firm.9 In the results we also report success probabilities and successful 

durations by individual company for the 8 companies with the largest number of drugs in the data base. In 

the life of a drug from discovery to market, there are many companies that are involved in its development, 

human clinical trials and marketing. In the results presented below the only company discussed is the drug’s 

“originator”. This is the company, according to Pharmaprojects, that discovered the drug. However, it may 

not be the company that sponsors the drug through the human clinical trials or takes the drug on to the 

market.10 One advantage of using the drug’s originator is that to some extent it is exogenous to the likely 

success of the drug in human clinical trials, particularly as only 1 in 1000 drugs ever makes it from discovery 

to human clinical trials. A disadvantage is that the originator, particularly a small company, is likely to license 

the drug to a large company in order for the larger company to take the drug through the trials and on to the 

market. We therefore may be underestimating the advantage to a drug of being sponsored by a large firm.

The measure of market size is the current world revenue for the drug’s therapeutic class and 

pharmacological description. For example, the market size for the arthritis drug, Celebrex, is equal to the 

world revenue for arthritis drugs based on the Cox-2 inhibitor. The market size is then categorized into five 

discrete groups. This is a very crude measure of expected return, particularly as it does not account for the 

number of drugs in the market.11 Unfortunately, we don’t have more direct measures of market size, such 

as the actual revenue earned by the drug. We also don’t have any information on the cost of drug 

development.12 However, one advantage of this measure is that it provides some indication of the market 

size for drugs that have not yet reached the market.

 

9

 Thanks to an anonymous reviewer for pointing this out.

10 See Danzon et. al (2003) for a discussion of how licensing arrangements are related to success rates.

11 Kyle (2002) finds that it is important to account for the number of drugs in the market when looking at market entry 

probabilities. 11 For discussion of drug development costs please see DiMasi et. al. (2003).

12 For discussion of drug development costs see DiMasi et. al. (2003).
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Finally, the data provides a number of other measures of drug characteristics including the drug’s 

route of administration and the drug’s original material. The drug’s route of administration is categorized by 

a number of degrees of specificity. For example, a pill is categorized as “alimentary”, and then “oral”. We 

report results as specifically as possible while having enough drugs in the category for sensible statistics. 

The drug’s original material is similarly categorized, so a particular biotech drug may be categorized as 

“biological”, and then “recombinant protein”. We report the statistics at the highest category level.

Table (2) representsthe number of drugs in each phase of development according to their company

size, material, route of administration and market size. Since 1989, first time entry drugs number 1,796 for

Phase I, 1,879 for Phase II, and 1,025 for Phase III. Of the 398 drugs that have been launched 

worldwide, only 217 of them have been launched into the US market. 1,465 of the 3,328 drugs in the 

sample have been withdrawn or discontinued from development. 

IV. Results

i) Do important drugs get to market faster?

In the US, the FDA has instituted policies that give pharmaceutical companies the opportunity to get 

“important” drugs to market. These policies include faster review of “priority” drugs and fast-tracking of 

human clinical trials for certain drugs. Priority drugs are defined by the FDA at the time of registration 

(generally after the completion of the Phase 3 clinical trials). The FDA also offers the opportunity for some 

drugs to shorten their time in human clinical trials and in this way, “fast-tracking” drugs to market. Time in 

development is calculated by adding together the average duration that drugs in the sample spend in each 

stage of development. On average, it takes just under 8 years for a drug to go from Phase I of human 

clinical trials to market launch in the US. The same figures for Phase II and Phase III drugs are 6.1 and 3.7 

years respectively. More specifically, an average drug spends 1.7 years in Phase I, 2.4 years in Phase II, 

and 3.7 years in Phase III before launch.

Graph 1 presents a graph showing the estimated duration for the drugs in the data set by their 

primary indication. While it takes just 5.5 years on average for HIV/AIDS drugs to get from Phase I to the 

market, it takes drugs for Parkinson’s disease almost twice that long to go through the same process. Drugs 
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for arthritis also spend more than 9 years, and asthma drugs spend more than 8 years in clinical trials on 

average. HIV/AIDS, anti-hypertension, and leukemia cancer drugs are some drugs that spend less than 7 

years in clinical development. Again, this result is suggestive, but more sophisticated analysis is necessary to 

determine whether more important drugs get to market faster, and why.

Graph 1: Time in Development (Years)

 - by Primary Indication

8.4

9.6

9.2

8.2

7.3

5.5

7.4

7.4

5.5

6.9

10.8

4 5 6 7 8 9 10 11

Alzheimer's Disease

Arthritis

Rheumatoid

Asthma

Cancer Breast

Cancer Leukaemia

Cancer Prostate

Diabetes

HIV/AIDS

Hypertension

Parkinson's Disease Primary Indication

Years

ii) Are there economies of scale or scope in drug development?

While the data and the analysis is not nearly detailed enough to get at this question, we can present some 

summary statistics on the relationship between firm size (as measured by revenue) and success probabilities 

and successful durations. The probabilities are calculated by multiplying together the estimated probabilities 

of a drug moving from one particular stage in development to the next stage. The method of calculation can 

be expressed by the following equation:

Pr (Launch=1|Phase I=1) = Pr (Launch=1|Phase III =1) x Pr (Phase III=1|Phase II=1) x Pr (Phase II=1|Phase I=1)

In words: probability of drugs being launched onto the market when they enter Phase I equals the product 

of the probability of drugs getting from Phase I to Phase II multiplied by the probability of the drugs in Phase 

II advancing to Phase III, multiplied by the probability of drugs in Phase III being launched onto the US 

market. 
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The reason behind this method is that information on all stages of clinical development is available 

for only a limited number of drugs. By studying this group of drugs exclusively, we would significantly 

reduce the sample size, and thereby, potentially exclude important information. Instead, we calculate the 

probabilities of the drugs in each phase of development getting to the next phase from the time they entered 

Phase I clinical trial until their launch to the market, and then multiplying the results together. The 

probabilities of drugs moving from a particular stage to the next are calculated using the number of drugs 

that have advanced to the next stage as numerator, and the sum of drugs that have been suspended, 

withdrawn or discontinued from that particular stage, or moved on to the next stage as the denominator. 

Drugs that are still active in that particular stage of development are not used in this calculation.

The results presented in Tables (4) through (9), show that drugs originally developed by Big Pharma 

firms are more likely to get to market, especially from Phase 3, where Big Pharma drugs have a 47% 

probability of getting to market, compared to 36% for non-Big Pharma drugs. Tables (5) and (6) show that 

this pattern holds for particular types of drugs such as drugs indicated for arthritis and drugs indicated for 

hypertension. In regards to successful durations, overall Big Pharma drugs are slightly quicker to market, 

but this pattern does not hold for the two subsets of drugs presented in Tables (8) and (9). We should be 

very careful interpreting such results as suggesting that that there are economies of scale or scope in 

pharmaceutical development, given both the discussion above on endogeniety and the heterogeneity in both 

success rates and successful durations for some of the larger companies.

Graphs (2) and (3) suggest that different companies may have different strategies in relation to drug 

development. It is particularly noteworthy that drugs from Company H have the lowest probability of 

getting to market, just 5% from Phase 1, and one of the longest successful durations at almost 8 years. On 

the other hand drugs invented by Company E have very high probabilities of entering the US market at 30% 

from Phase 1. Again these types of statistics are simply suggestive. We cannot conclude that the 

heterogeneity is due to such development strategies. We can however conclude that it will be difficult to 

empirically estimate economies of scale or scope given that company specific development strategies may 

influence observed probabilities of success.
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Graph 2: Probability of US Entry - by Company

0.09

0.07

0.12

0.10

0.30

0.09

0.08

0.05

0.14

0.20

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

A B C D E F G H I J

Company

Percentage of US Entry

Graph 3: Time in Development (Years) 

- by Company

6.5

8.6

8.9

6.3

7.3

6.3

7.5

7.9

4.9

7.3

4.0 5.0 6.0 7.0 8.0 9.0 10.0

A

B

C

D

E

F

G

H

I

J

Comapny

Years

iii) What effect does the drug’s expected market return have on success probabilities and 

durations?

The results presented in Table (4) show that as market size increases from less than $500 million to less than 

$10 billion, the probability of successfully completing each phase is generally increasing. Drugs with a 

market size of less than $500 million have just over a 1 in 4 chance of getting to market from Phase 3, while 
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drugs with markets between $500 million and $2 billion have a almost 1 in 2 probability of getting to 

market. However, the overall picture is far from clear. There are 100 drugs in Phase 1 that have a market 

size as being over $10 billion, of these drugs only 4 have reached the market in the US. Tables (5) and (6) 

present the success rates on two subsets of drugs, those indicated for arthritis and those indicated for 

hypertension. Arthritis drugs associated with a market size over $5 billion have a less than average 

probability of getting to market, while similar hypertension drugs have a greater than average probability of 

getting to market. Finally, it is not clear how to interpret such success rates as in equilibrium we would 

expect a negative relationship between expected return and successful probabilities (Danzon et. al., 2003).

Graph 4: Time in Development (Years) - by Market Size

7.1

7.4

8.0

7.9

8.9

6.0 6.5 7.0 7.5 8.0 8.5 9.0

US $0-500 Million

US $501-2,000 Million

US $2,001-5,000 Million

US $5,001-10,000 Million

>US $10,000 Million

Market Size

Years

In regards to successful durations, Graph (4) shows that time in development is generally increasing in 

market size, with large market drugs taking almost 2 years longer to get to market than small market drugs. 

The results presented in Tables (8) and (9) shows that this pattern also seems to hold for the two subsets of 

drugs (arthritis and hypertension). It is again not clear how to interpret such statistics given that companies 

decide whether or not to end development and how much to spend on continued development, based on 

their expectation of market return.

iv) What effect do drug characteristics have on success rates and successful durations?
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Table (4) presents the success rates in regards to US entry from different phases of development for 

different categories of route of administration and different original materials. In regards to route of 

administration, oral drugs seem to have a relatively high probability of getting to market, but drugs delivered 

by subcutaneous injection have an even higher probability of getting to market. At more general category 

levels there is not much different between success rates for alimentary drugs and parenteral drugs 

(injections). In regards to original materials, biologicals seem to have higher success rates than other types 

of drugs. The most interesting result from Tables (5) and (6) is that almost all intravenous drugs get to 

market for arthritis, while no intravenous drugs get to market for hypertension. Similarly, a high percentage 

of biological drugs get to market for arthritis, while there is only one biological in the sample that has been 

developed for hypertension and that drug did not get passed Phase 1.

Table (7) presents the time in development for drugs with different characteristics. The table shows 

that drugs that would be relatively easy to administer, including orals, respiratory and transdermal (for 

example patches), are quicker to market than drugs delivered by injection. In particular, drugs delivered by 

intramuscular injection take over 9 years to get from Phase 1 to market, while transdermal drugs take less 

than 7 years to get from Phase 1 to market. It is not clear whether these results indicate that drugs with 

higher returns will get to market quicker or whether it is simply easier to conduct human clinical trials when 

drugs have particular routes of administration.

V. Conclusion 

Drug development is one of the salient characteristics of the pharmaceutical industry. However, it is not an 

area of the industry for which we have a lot of information. Recently, a number of authors have started to 

make use of data on success rates and durations for human clinical trials (Abrantes-Metz et. al., 2003, 

Danzon et. al., 2003, and Kyle, 2002). This study analyzes the probability of success and the length of 

successful durations for 3,328 branded drugs that had entered either Phase I, Phase II or Phase III of the 

human clinical trials somewhere in the world between 1989 and 2002. Our basic summary is that 

approximately 1 in 8 drugs that entered Phase I are launched on the US market.

13 On average, this part of 

 

13 Our probability estimate is much lower than the FDA's. This is probably because the sample includes drugs that 
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the development process takes just under 8 years. This number is close to the FDA’s own figure of 8.5 

years in their tracking U.S. human clinical trials (FDA, 2002). The complete process of getting a drug to the 

market can be substantially longer. Bosch and Lee (1994) report that it takes a total of 12 years to get a 

new drug approval from the FDA. We excluded the preclinical period from our analysis since the 

Pharmaprojects data set is based on public information, and so focuses on drugs that have already made it 

to the late stage development. 

There four major questions, that studies like this one, may be able to answer. Do more important 

drugs get to market quicker? Are there economies of scale or scope in drug development? What effect 

does the expected return have on the drug’s development? What effect do characteristics of the drug have 

on the drug’s development? We do find that HIV/AIDS drugs get to market quicker than the average drug. 

 We find that drugs originally developed by the 10 largest pharmaceutical companies have slightly lower 

probabilities of US entry from Phase I, but spend substantially less time in all clinical development phases 

than the average drug. Drugs with the potential for extremely lucrative markets of US $10 billion or more 

tend to spend more time in development, and have a lower probability of actually reaching the market. 

Biological drugs have some what higher probabilities of making it to the US market, but this may vary 

across indications.

The results give, at best, partial answers to these questions. In some cases the results seem 

unintuitive, but as discussed above, answering these questions is quite complicated and requires 

careful analysis of these newly available data sets. It is hoped that the results discussed above increase our 

knowledge of the industry and create interest in more sophisticated econometric analysis such as that 

presented in Abrantes-Metz et al. (2003).

 

were never intended for the U.S. market.
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Kyle, M. (2002). Entry in Pharmaceutical Markets. Carnegie Mellon University, Dec. 2002.

Levy, R. (1999). The Pharmaceutical Industry. A Discussion of competitive and antitrust issues in an 

environment of change. Bureau of Economics Staff Report, Federal Trade Commission. March.
-17-

APPENDIX

Table 1: Drugs That Appear in Each Phase of Development

Number Percent

Phase 1 only 931 28%

Phase 2 only 786 24%

Phase 3 only 466 14%

Phase 1 and Phase 2 only 586 18%

Phase 1 and Phase 3 only 52 2%

Phase 2 and Phase 3 only 280 8%

Phase 1, Phase 2 and Phase 3 227 7%

Total 3328 100%
-18-

Table 2: Number of Drugs by Category

Phase 1 Phase 2 Phase 3

US 

Launch

World 

Launch Ceased

Big Pharma 268 304 176 60 80 339

Non Big Pharma 1528 1575 849 157 318 1126

Material 

Biologicals 450 387 187 43 81 165

Chemicals 932 1046 664 159 279 612

Natural Products 66 80 60 13 21 44

ROA

Alimentary 403 487 372 103 161 222

Parenteral 492 539 323 76 141 219

Respiratory 48 56 21 5 9 29

Topical 64 68 71 22 38 37

Transdermal 28 28 26 5 9 22

Novelty

Not Available 931 944 353 21 31 1465

All Preclinical 4 2 2 0 0 0

Established Strategy 178 210 212 74 153 0

New Formulation 84 104 115 29 57 0

Low Novelty 56 22 5 0 0 0

2nd, 3rd or 4th Compound 156 139 59 0 0 0

Leading Compound 387 459 279 93 157 0

Market Size

US $0-500 Million 169 206 121 20 41 157

US $501-2,000 Million 521 581 330 94 144 436

US $2,001-5,000 Million 694 647 339 64 123 487

US $5,001-10,000 Million 230 259 123 28 58 222

> US $10,000 Million 138 154 91 7 22 141

Drug Age (Years) 12.8 13.9 15.4 15.9 16.2 15.9

(Standard Deviation) (5.0) (5.0) (5.4) (5.7) (5.1) (4.4)

N 1796 1879 1025 217 398 1465
-19-

Table 3: Primary Indication - Number of Drugs by Category

Phase 1 Phase 2 Phase 3

US 

Launch

World 

Launch Ceased

Alzheimer's Disease 22 31 13 2 2 26

Arthritis Rheumatoid 29 34 11 5 6 15

Asthma 42 49 18 4 8 29

Cancer

Breast 34 34 17 3 9 17

Leukemia 15 22 9 5 6 12

Lung 34 34 10 0 1 9

Prostate 16 19 12 3 3 2

Diabetes 39 39 21 6 7 14

Hepatitis 26 21 11 3 7 6

HIV/AIDS 46 58 29 14 15 36

Hypertension 29 41 41 10 23 26

Parkinson's Disease 19 20 12 4 5 8

Thrombosis 28 31 17 4 8 23

N 1796 1879 1025 217 398 1465
-20-

Table 4: Probability of US Entry of Clinically Developed Drugs from Phase of Development

(Number of Drugs in the Sample)

Phase 1 Phase 2 Phase 3

All Drugs 0.12 0.17 0.38

(1366) (1218) (542)

Big Pharma 0.10 0.17 0.47

(217) (219) (127)

Non Big Pharma 0.12 0.17 0.36

(1149) (999) (415)

Biologicals 0.25 0.31 0.53

(309) (218) (75)

Chemicals 0.19 0.25 0.45

(725) (664) (343)

Natural Products 0.18 0.23 0.37

(50) (45) (30)

Alimentary 0.28 0.34 0.51

(301) (308) (200)

Oral 0.29 0.35 0.51

(290) (296) (197)

Parenteral 0.28 0.32 0.49

(405) (343) (147)

Intravenous 0.30 0.34 0.48

(209) (195) (86)

Subcutaneous 0.43 0.45 0.61

(43) (39) (18)

Intramuscular 0.39 0.45 0.69

(36) (23) (13)

Respiratory 0.17 0.25 0.67

(36) (27) (6)

Topical 0.27 0.37 0.50

(49) (38) (42)

Transdermal 0.13 0.21 0.44

(23) (17) (9)

US $0-500 Million 0.09 0.13 0.26

(133) (128) (69)

US $501-2,000 Million 0.16 0.23 0.47

(418) (391) (186)

US $2,001-5,000 Million 0.13 0.19 0.40

(506) (400) (159)

US $5,001-10,000 Million 0.09 0.14 0.44

(178) (172) (64)

> US $10,000 Million 0.04 0.06 0.13
-21-

(100) (110) (55)

Table 5: Probability of US Entry from Phase of Development

(Number of Drugs in the Sample) - Arthritis*

Phase 1 Phase 2 Phase 3

All Drugs 0.30 0.36 0.61

(42) (34) (18)

Big Pharma 0.43 0.57 1.00

(4) (7) (4)

Biologicals 0.60 0.67 1.00

(20) (12) (3)

Chemicals 0.24 0.32 0.62

(21) (21) (13)

Orals 0.32 0.35 0.56

(11) (16) (9)

Intravenous** 0.83 0.83 0.83

(9) (4) (6)

Large Market 0.19 0.29 0.50

(12) (12) (10)

*By any Indication

** All Drugs Went Through Clinical Phases of Development

Table 6: Probability of US Entry from Phase of Development

(Number of Drugs in the Sample) - Hypertension*

Phase 1 Phase 2 Phase 3

All Drugs 0.22 0.28 0.46

(34) (41) (28)

Big Pharma 0.27 0.38 0.57

(7) (6) (7)

Biologicals** 0.00 0.00 0.00

(1) (0) (0)

Chemicals 0.25 0.32 0.46

(28) (34) (14)

Orals 0.29 0.35 0.52

(17) (27) (16)
-22-

Intravenous** 0.00 0.00 0.00

(5) (6) (2)

Large Market 0.30 0.37 0.58

(25) (31) (19)

*By any Indication

**No Drugs Have Made to the Market

Table 7: Time in Development (Years)

Phase 1 Phase 2 Phase 3

All Drugs 7.8 6.1 3.7

Big Pharma 7.1 5.5 3.4

Non Big Pharma 8.0 6.4 3.9

Biologicals 8.0 6.4 3.7

Chemicals 7.7 6.1 3.7

Natural Products 7.3 5.5 3.9

Alimentary 7.5 5.8 3.5

Oral 7.5 5.8 3.5

Parenteral 8.2 6.6 4.0

Intravenous 7.9 6.3 3.7

Subcutaneous 8.7 7.1 4.2

Intramuscular 9.2 7.4 4.6

Respiratory 6.7 5.1 3.3

Topical 7.7 6.4 4.5

Transdermal 6.8 4.9 2.9

N 1796 1879 1025
-23-

Table 8: Time in Development (Years) - Arthritis**

Phase 1 Phase 2 Phase 3

All Drugs 7.9 6.4 3.7

Big Pharma 8.3 6.9 3.8

Biologicals 5.8 4.5 2.1

Chemicals 9.2 7.1 4.4

Orals 8.4 6.5 3.5

Intravenous NA* NA* 4.3

Large Market 9.5 8.0 4.8

N 55 63 31

**By any Indication

* Number of observations is insufficient for calculation

Table 9: Time in Development (Years) - Hypertension**

Phase 1 Phase 2 Phase 3

All Drugs 7.3 6.4 3.2

Big Pharma 7.5 6.4 3.2

Biologicals NA* NA* NA*

Chemicals 7.3 6.5 3.2

Orals 6.4 5.6 3.2

Intravenous NA* NA* NA*

Large Market 7.1 6.4 3.4
-24-

N 35 50 47

**By any Indication

* Number of observations is insufficient for calculation