Is The Cost Of New Drugs Being Over Exaggerated1 year ago
Posted on Feb 04, 2019, 6 p.m.
The estimated cost of developing a new drug is over $1 Billion according to the pharmaceutical industry, but it has been suggested the actual cost is less than $125 Million.
Chief executive officer Andrew Witty of GlaxoSmithKline says “the high cost is one of the greatest myths of the industry”, according to Rueters, and “was an average figure that included money spent on drugs that ultimately failed”. Many suggest the reason the myth is kept alive is to justify high retail cost of prescription medicines.
More than ever people have become outraged at the high costs of medicines, these costs will break health system budgets, and frequently force people to go without needed medications putting them in peril. Drug prices keep getting raised high and higher, but it’s not because of costs, curing, or controlling disease, rather because they can. Better drugs are not being developed at these inflated prices, most new drugs provide no clinical advantage, and 1 in 5 can cause serious harm. 11 out of 12 cancer drugs cost more than $100,000 per year and only one of those extended life for a few weeks in 2012.
Big Pharma dipped into its deep pockets to air more than 1.3 million television adverts in 2016 for prescription and over the counter drugs and other health messages that cost about $4.6 billion. You must have seen at least a handful of them, they claim to treat one ailment but come with a long list of mostly laughable side effects stated at the end which are often worse than the original ailment they are said to treat. Let’s follow the math shall we, of the inflated costs, just for laughs:
Big Pharma estimates to bring a drug to market it costs $1.3 billion. Let’s subtract the $650 million for profits they would have been making if they invested in stocks and bonds, which is not research cost at all, rather a high figure for profits they might have made and is NOT a real cost that should be recoupled, leaving a balance of $650 million.
Subtract $325 million that is subsidized by taxpayers through academic and public laboratories such as the CDC, NIH, etc; tax credits and deductions granted to Big Pharma; and purchasing medicines with taxpayer monies. Research costs for cancer drugs are even lower as most of the basic research and thousands of clinical trials are paid by the taxpayer via the National Cancer Institute and other foundations, leaving a real balance of $325 million.
Now you can subtract 30% as the $1.3 billion is based on the most costly fifth of drugs rather than the average; reducing by 30% will correct this distortion leaving a balance of $230 million.
Median cost is more accurate, a few expensive projects always inflate overall average, but smaller and shorter trials lessen the average. To account for this minus numbers that don’t use the median cost of drug development where half of the projects cost more and half cost less leaves a balance of $170 million.
Backing a large estimate inflates the cost of research, there is not an accurate way to estimate costs as cost of discovery varies widely from an inexpensive trial to a costly 30 year trial. Deduct an over inflated estimate for basic research to reflect a more accurate net median balance down to $125 million for developing drugs.
In all fairness you must also remove taxpayers subsidizing $4.6 million in advertising which will put the actual balance and cost to less than $125 million, which is a far cry from $1.3 billion. The cost to discover new drugs is roughly about one sixth of what Big Pharma over exaggerates, and 1.3% of revenues after deducting taxpayer subsidies.
Every year drug companies raise their drug prices by 20-25% price gouging, no other country allows this product hoping, pay for delay. This is market spiral pricing strategy where prices are continually increased regardless of value or cost. Would you pay more for last year’s car model or one five years older? Why do we not think in terms of effectiveness or in this case non-effectiveness and tell patients about treatments in those terms. Why are we paying, and continuing to pay more for medicines that do not actually cure. Aside from antibiotics, which are now failing due to resistance, there is not an actual cure for anything. Just delays that treat symptoms just enough to keep you coming back for more and spending more money.
Without changes to prescription medicine pricing it is very likely we will witness the collapse of the health system, and further decline of heath in the American population. Big Pharma is making Big Profits with these price pushes, the governing bodies that be and are in place to protect us should be negotiating these spiraling prices downward in our best interest. We should be seen as more than dollar signs.
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(1) Light D, Kantarjian H. Market Spiral of Cancer Drugs. Cancer Nov 15, 2013. Pg 3900-3902.
(2) $1.3 billion is the estimate often used, but this number could vary from $92 million to $4.2 billion depending on the information source, and the methods used (Morgan, et al. The cost of drug development. April 2011; Health Policy. 100(1):4-17)