How Expensive is Drug Innovation?

How Expensive is Drug Innovation?

High prices for patented drugs are quite often attributed to the exorbitant cost of drug innovation, by the global pharma players. This argument is played, replayed again, again… and again by them, in various ways and forms, especially when many eyebrows are raised, failing to fathom the primary reason for ever escalating prices of life-saving new drugs.       

I find the same argument often getting echoed by some section of both the global and local media too, and also through some cleverly disguised and apparently sponsored articles on the subject. 

In this article I shall dwell on this sensitive issue.

A strong justification: 

The Institute for Policy Innovation (IPI) based in Texas in the United States, in an article titled “The High Cost of Inventing New Drugs–And of Not Inventing Them”, published on April 16, 2015 reiterated that the financial cost of developing new drugs is indeed a big one.

It argues that “there is also a big cost to not developing new drugs, and that cost can be both financial and human. People may be able to live with the pain that an undiscovered drug might have alleviated, but they may not be able to do all the things they would have.”

The paper asks, “A cancer patient might still have a few productive years after a diagnosis, but how much would it be worth to the patient—and to society (think Steve Jobs), if a new drug could extend a patient’s life indefinitely?”

“The drug manufacturers poured money into finding a treatment for AIDS once it became clear the disease would take thousands of lives. The research and development was costly and didn’t emerge overnight, but being diagnosed with AIDS is no longer a death sentence,” the authors elucidated.

This is a very cogent argument, and nobody would dispute it. This issue lies somewhere else, as I would try to explore in this article.

The supporting data: 

We also find supporting published data to justify the high cost of innovation with numbers.

On November 18, 2014, a new study by the ‘Tufts Center for the Study of Drug Development’ highlighted that developing a new prescription medicine and gaining its marketing approval, which is a process often lasting longer than a decade, is estimated to cost US$ 2,558 million.” This number is indeed mind boggling by any yardstick.

While many details of the study remain a secret, only slightly more than half of this cost is directly related to research and development (R&D). For example, US$ 1.2 billion are “time costs” – returns that investors might have made if their money wasn’t tied up in developing a particular drug.

Not many takers:

Besides the above reason, for several other factors, there does not seem to be many takers for this exorbitant cost of innovation and bringing a new drug to the market.

The above study has become a contentious one and has, therefore, been challenged by many experts. I would give here just one example, out of many, from a highly credible source.

May 14, 2015 issue of ‘The New England Journal of Medicine’ questioned the methods used to generate the US $ 2.6 billion figure and raised the following interesting points in the above Tufts Center study:.........

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