A fantastic article on the real cost of pharmaceutical research

Well worth the complete read:

http://www.palgrave-journals.com/biosoc/journal/vaop/ncurrent/full/biosoc201040a.html#

Abstract:

It is widely claimed that research to discover and develop new pharmaceuticals entails high costs and high risks. High research and development (R&D) costs influence many decisions and policy discussions about how to reduce global health disparities, how much companies can afford to discount prices for lower- and middle-income countries, and how to design innovative incentives to advance research on diseases of the poor. High estimated costs also affect strategies for getting new medicines to the world's poor, such as the advanced market commitment, which built high estimates into its inflated size and prices. This article takes apart the most detailed and authoritative study of R&D costs in order to show how high estimates have been constructed by industry-supported economists, and to show how much lower actual costs may be. Besides serving as an object lesson in the construction of ‘facts’, this analysis provides reason to believe that R&D costs need not be such an insuperable obstacle to the development of better medicines. The deeper problem is that current incentives reward companies to develop mainly new medicines of little advantage and compete for market share at high prices, rather than to develop clinically superior medicines with public funding so that prices could be much lower and risks to companies lower as well.

Interesting snippets:

"...from the moment in December 2001 when the results of this 2003 DiMasi et al study (2003a) were presented to the world press by the president of Merck – over a year before its journal publication – the $802 million figure has erroneously been characterized as the R&D cost ‘per new drug’, not the costliest one-fifth (Harris, 2001)."

"In the long, difficult search for effective drugs to treat AIDS, Goozner assembles evidence that the key companies spent $150–$200 million each, for an industry total of $2 billion, while the US government spent close to $10 billion (Goozner, 2004, pp. 157–163). Goozner estimates that all AIDS R&D costs from the beginning were earned back in one year. But he also found that as revenues soared on high prices, so did company claims of how much R&D cost them."

"In the $802 million estimate, DiMasi et al (2003a, p. 166) ‘solve’ the problems of no data on the costs of discovery by estimating an average cost of $121 million and adding it in at the beginning of their R&D estimate. This added 52.0 months as ‘the average time from synthesis of a compound to initial human testing for self-originated drugs.’ When compounded by the ‘cost of capital’ this accounts for more than one-third of the $802 million estimate, a large number that seems unwarranted for several reasons. First, there is no verifiable cost estimate. Second, costs vary greatly. Third, when PhRMA provided detailed breakdowns of R&D costs, only about a third of all preclinical costs appeared to involve basic research for discovery (Pharmaceutical Research and Manufacturers of America, 2002). Finally, 84.2 per cent of all funds for discovering new medicines come from public sources (Light, 2006). Therefore, a more realistic conclusion is that the costs of R(research) are unknown and highly variable."