One of the most expensive parts or often by far the most expensive part of a drugs development is clinical trials. This can cost up to $100m. This is about testing a drugs effectiveness by using control groups, and also the careful monitoring of side effects.
Up to 97% depending upon the category of drug and the illness it is targeted at will fail on trial costs or effectiveness. If may not work at all when tested on humans, it may not be as good as current treatments, it may only be marginally better and not worth the cost of further trials, it may produce unacceptable side effects or the drug company may not be able to get the funds to progress from initial trails to complete full trials. The latter is very common as many of the leading biotechnology companies are start ups, who are reliant on being able to raise money from external funding sources.
The current trials system is first and foremost about safety and there is beginning to be a debate on whether it is too risk adverse meaning that many promising drugs don't get beyond the initial development stage where the market size and therefore the cost of treatment is too high, mainly due to the cost of the clinical trials. A good example of this is Ebola treatment, there are successful drugs to treat this, that are now having uncertified field trials due to the very high death rates. Normally this would not be considered, but with up to 90% death rate, the decision has been made, there is not much to lose and much to potentially gain from using these uncertified drugs. Drug companies are getting round these high trial costs to a degree by carry out trials in cheaper 2nd/3rd world countries.
Any reform of the current trials system, so more beneficial drugs come to market and also at cheaper prices, will have to be at the 'nth' cost of safety, which is a political question? Is the current system too risk adverse? Would the benefits of more drugs coming to market outweigh the greater risks of less thorough cheaper trials? Are we prepared to take more risks on patient safety? You, the politicians and society at large needs to decide?
The development of better pre-drug-trial testing systems like human body simulators are a promising area of development to reduce the risks to patents in the trials and maybe reduce the trials cost.
How do I know all of this, because this information is available on the Internet? A good starting point and a very good source of many latest technological and drug developments is the free Patrick Cox technology newsletter by Mauldin Economics, a US based investment company, but if you subscribe, take note of the strict unauthorized disclosure terms, but there are also many other sources of information. Google is a wonderful research tool and saves much time when you are researching something and need answers.
We are beginning to see the benefits of the biotechnological revolution and many other new technologies. The pace of change is getting faster and faster in an increment rather than revolutionary way that inventions like the motor car and electronics did in the 20th century. A good example are LED bulbs, where light to power efficiency is revolutionary compared to the old Edison / florescent bulbs, but we don't think of them like that as we have been used to having electric lights for over 100 years.