How Much Does a New Drug Cost?
Now along comes a new method, from Matthew Herper at Forbes. It uses only public, audited data, and it’s breathtakingly simple: over a 15-year period, they divided each company’s R&D spend by the number of drugs they got approved. The result: … For every approved drug, pharma spent between $4 billion and $11 billion on R&D…
[I]t’s a useful corrective to the notion that PhRMA just wanders down to the university labs once a year to harvest the new drugs, then spends the rest of the year sitting back and idly watching the royalty checks pour in through the mail slot. Finding an approvable new drug is a long, expensive process that too often goes awry–and often, the rules we impose make things worse, and even tax policy. We should think about these numbers every time someone like Marcia Angell suggests that really, Big PhRMA barely does anything. Unfortunately, Big PhRMA is doing a lot, although not necessarily effectively as they could. Even more unfortunately, a dry pipeline hurts us at least as much as it hurts them.
Full Megan McArdle post worth reading.
That’s a lot of money.
I think this is a very valuable point to consider. I’m shocked by the size of the costs produced by failure.
There are numerous books written to bash drug companies. One of the better known books is Marcia Angell’s The Truth About Drug Companies. However Megan’s analysis is deceptively simple yet definitive — total R&D divided by the number of new approved molecules. I would also be interested in drug sales compared to development costs. I suspect only a few of the approved drugs are blockbusters, while many are money-losers. This explains why new drugs often sell for $125 or more for a month’s supply. It also helps explain why drug makers spend so much time looking for drugs that treat large disease groups – the return on investment is precarious.
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