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First in the laboratory on animals and/or body tissue to test for toxicity. Then tested on a small group of healthy people of around 60-80 ,who are paid quite richly as this is the most dangerous stage, for side affects and other things. And then another group of people test it larger than the first and then once more with a very large amount of people. Other answers can add more detail.

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Q: What are three main steps in medicine testing?
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