Pharma R & D Spending is Down

And that’s probably bad news. Here is Megan McArdle, writing in The Atlantic:

For the first time ever last year, the global drug industry cut its R&D spending.  The trend is expected to continue, at least in the near term.

You might initially think that this is good news for cost control–the expensive brand name drugs will all go generic, and we’ll save a bunch of money on prescription drugs.  And indeed, this is absolutely true.  But this will have repercussions for other areas of health care, and those repercussions are not good.  While some drugs are simply an added expense (think chemotherapy prolonging the lives of people who would otherwise have died sooner), many of the real blockbusters substitute for labor-intensive treatment.  Statins instead of cardiac catheterizations or coronary bypasses.  Avandia instead of amputations.  Hydro-chlorothiazide instead of nursing home care for your massive stroke.

We’ll still have all those drugs, of course.  But with less R&D, we’ll presumably see fewer pharmaceutical substitutes for the expensive conditions we still spend a lot of money treating, like Alzheimer’s. Which means that health care expenses might actually rise faster than we expect.

Comments (7)

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  1. Ken says:

    Interesting post.

  2. Buster says:

    Drug research is getting more expensive and the FDA is requiring larger and longer clinical trials. It has also raised the bar on what it will approve. If there are other good drugs in a given class, follow on candidates the so-called “me too” drugs are scrutinized more closely.

  3. Devon Herrick says:

    The drug pipeline is empty and blockbuster drugs with $100 billion in annual sales are going generic soon. This is not a good sign. If drug makers’ blockbuster drugs are going generic and R&D is down, that suggests they don’t have good candidates to invest in. It could also mean the FDA has set the bar so high that once promising candidates are now being abandoned.

  4. Stephen C. says:

    This is worrisome. We get the best return form drugs of any major therapy. We definitely get more at the margin from drug therapy than from doctor therapy or hospital therapy.

  5. Tom says:

    The first comment on the article questioning the accuracy of the data is interesting.

    “This information is very questionable. In contrast to what this article states, it appears R&D spending increased in the private and public sectors in 2010. PhRMA published its annual profile that shows that member R&D spending increased 6.4% in 2010. Since PhRMA’s members include 35 of the largest biopharmas in the industry, the data they publish is a good barometer of spending. Moreover, Pharmaceutical Excecutive published its 2011 profile reporting similar gains in 2010 R&D spending for the top 50 biopharmas. Since the Top 50 spend approximately 80% of all R&D, their spending typically reflects industry overall spending. This week Ernst & Young and Burrill & Company will publish their biotech spending reports, which focus more on smaller firms. It is anticipated spending will increase, although the number may be impacted by mergers and acquisitions such as Roche/Genentech. So, let not jump the gun without a deeper analysis than the one in this article. When all the numbers are on the table, we can say for sure whether R&D has decreased. Right now, it does not appear so.”

  6. JOE BRITZ says:

    YO !!
    People over 50 are making more insurance claims– Well listen dingbat– People over 50 have been paying premiums for over 30 years without making claims

    Your lack of logic is somewhat noticeable

  7. Eric Adler says:

    @ Devon Herrick
    July 1, 2011 at 3:08 pm

    Do you have any evidence that the FDA bar has been set too high? My understanding is that some of the so called great advances that have hit the market have had to be withdrawn for lack of effectiveness and harmful side effects.

    Here is one egregious example of a drug which got accelerated approval – Avastin. It has been found to be ineffective and dangerous, and the FDA is moving to withdraw it.

    Drug development has had problems with the placebo effect.