The Cost of Naming Prescription Drugs Is Insane

Oct 9, 2018 | Brand Naming

Pharmaceutical companies are spending big bucks to name their drugs.

An average naming project costs $250,000, and that doesn’t include the costs of registering, trademarking, and getting the name approved in the various regulatory bodies. At the end of the project, pharma companies can spend up to $2.5 million on a brand name.

Those costs might seem outrageous, but they are a symptom of a high stakes game and a diminishing resource.

$2.5 Million Is a Rounding Error

According to Scientific America, the cost of developing a prescription drug that gains market approval is $2.6 billion.

The bulk of these costs go into the testing and validation phase. Matthew Herper writes in Forbes, “90% of medicines that start being tested in people don’t reach the market because they are unsafe or ineffective.” These failures are rolled into the overall cost of bringing a new drug to market.

It’s the 10% that pass market approval that get a brand name. These are the drugs that have to pay for all the R&D and failures, and deliver a healthy return for shareholders.

When the stakes are this high, investing 0.096% of the project cost into the brand name isn’t so outrageous.

Brand Names Are a Diminishing Resource

Across all sectors, brand names are a diminishing resource. Domain names are being gobbled up, and thousands of trademarks are being filed annually. In 2016 alone, the United States Patent and Trademark Office (USPTO) registered over 309,000 trademarks.

The issue is even more acute in the pharmaceutical industry.

According to a report in CNN, “Two departments within the FDA — the Center for Drug Evaluation and Research and the Center for Biologics Evaluation and Research — scrutinize each proposed name and then reject about 20% and 35% of the names, respectively.”

This means more than half of all proposed brand names are rejected.

With thousands of drugs on the market, 84% of rejections are due to potential confusion with existing market names. The FDA does not want drug names to be too similar when prescriptions are filled.

For example:

  • Celebrex vs Celexa. Celebrex is a nonsteroidal anti-inflammatory drug, whereas Celexa is used to treat depression.
  • Losec vs Lasix. Losec is a medication used in the treatment of gastroesophageal reflux disease, and Lasix is used to treat fluid build-up due to heart failure, liver scarring, or kidney disease.
  • Lamictal vs Lamisil. Lamictal is used to treat epilepsy and bipolar disorder, and Lamisil is an antifungal medication.
  • Zantac vs Xanax. Zantac is used to treat heartburn, while Xanax is an anti-anxiety medication.

These similarities can lead to serious issues if misprescribed.

A Name Creates Preference

Beyond the regulatory issues, an effective brand name delivers significant financial returns.

Advil costs 50% more than a generic container of ibuprofen. The same is true for brand names like Claritin and Tylenol, but consumers reach for the brand names more often than not.

In the prescription realm, a recognized brand name can lead to a conversation. For example, patients diagnosed with atrial fibrillation, or AFib, may ask their doctor to tell them more about Pradaxa.

AFib is an irregular heartbeat that can create blood clots that lead to a stroke. To treat the condition doctors typically prescribe an oral anticoagulant — either Pradaxa, Xarelto, or Eliquis. Once you become aware of the disease you’ll start to notice the hum of advertising coming from these three brands.

A patient that asks for a drug by name will likely have it prescribed. When all things are equal and the efficacy of one drug over the other is similar, a doctor isn’t going to argue with the patient. They’ll prescribe based on the patient’s preference.

That simple conversation can turn into a long term prescription, which in its simplest terms is a long term customer.

Pharmaceutical naming is a unique niche with high stakes and big costs, but it’s a microcosm of what we see in all areas of branding. To be a recognized brand, you can’t be one of the guys. You’ve got to stand out like an orange tree in an evergreen forest.

Think of your brand name like the title of a story. It’s what people remember, and how they refer to you again and again.

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Jeremy Miller

Top 30 Brand Guru

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