Friday, January 1, 2016

The pharma myth that will not go away: we spent 100s of millions on R&D

Reading book "The $800 Million Pill: The Truth behind the Cost of New Drugs" by Merrill Goozner (2005) was kind of revelation for me. Even if it is written more than 10 years ago, it feels if it was published yesterday. 

These days we are constantly reminded by pharma and biotech industry that it costs a lot of money to develop a drug. Some even suggests that it cost around 800 million or even more to develop a single drug. In fact, we "intuitively" accept that this statement must be true, notwithstanding of waste associated with any such program. Of course, it must cost that much money to Pharma to run FDA required sequential clinical trials (phase I, II, III, IV) involving in sum 1000s of patients. 

However, careful analysis of Pharma R&D expenditure reveals something entirely different. No one seriously disputes the fact that the "biggest" drugs for treatment of rare diseases (enzyme deficiency), HIV, cancer that entered market for past 25 years were initially developed in labs funded wholly or partially through federal grants (mostly NIH) or via nonprofit organizations. Moreover, not just those drug were initially synthesized and tested with non-industry funds, for many of these drugs clinical trials including phase III trials were run with non-industry funds (federal or private nonprofit funds). Basically, on many occasions, already tested drugs were handed to pharma industry on a silver platter.

Moreover, in 1995, at the insistence of pharma executives, federal government voluntarily withdraw "reasonable price clause" that were previously included in licensing agreement for drugs developed with federal money. This allowed pharma industry to set any price on drug they wished [otherwise known as "what market would bear"] and recover their own cost within first year of drug sale.

Still, every time voices are raised to complain about rising drug costs, pharma's public relations offices are working hard to convince people and legislative representatives that without freedom to set prices pharma R&D would crumble. The pharma industry has been using this same tactic since late 80s when first HIV drugs entered market priced for thousands of dollars. In US, there isn't even a free market when it comes to prescription drug or any drug for that matter. Free market means free movements of goods and price setting based on some generally accepted values, but drug importation is not allowed in US and federal agencies are explicitly prohibited to determine real medical values for new drug.  

In sum, I highly recommend to read this book.

posted by David Usharauli  

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