Healthy Skepticism Library item: 323

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Goozner M.
Disputing how drug costs are computed: The $800 Million Pill: The Truth Behind the Cost of New Drugs
Philadelphia Inquirer 2004 May 2

Full text:

Drug costs are so high because research costs for developing new medicines are so high, goes the common wisdom promulgated by the U.S. pharmaceutical industry.

But The $800 Million Pill challenges that notion, pointing out that much of the research is actually paid for by the U.S. government. It notes that many of the so-called costs of research really include money spent by the drug companies on marketing what are often “me-too” or copycat drugs that often are only marginally different from existing medicines.

Many “improvements” are often incremental ones made mainly to extend the life of a drug’s patent.

And Merrill Goozner, former chief economics correspondent for the Chicago Tribune, makes a convincing case.

The $800 million price tag for the development of successful new therapies – the average cost of developing a new drug – comes from studies done by the Tufts University Center for the Study of Drug Development.

However, Goozner cites another, alternative study by the Global Alliance for TB Drug Development, which, using a similar methodology, came up with a cost of discovering and developing a new anti-tuberculosis drug at $115 million to $240 million.

That study did not include the cost of research on me-too drugs or those whose sole purpose was to extend patent life. Nor did it include the cost of clinical trials that often were not even submitted to the Food and Drug Administration, but are used for promoting the product.

“In short,” he writes, “if the industry-funded academic economists at Tufts had factored out the half of industry research that is more properly categorized as corporate waste, their number would have been similar to that of the Global Alliance.”

Goozner observes that therapies for diseases rampant among poor nations, such as malaria, black fever and tuberculosis, often go undeveloped because there’s not enough profit in it for the drug companies to take an active interest.

Having pointed out problems with the system, Goozner does offer some suggestions for changing the way drugs are developed.

His primary recommendation is that Congress create an independent institute within the National Institutes of Health to conduct clinical trials comparing existing medicines. The trials would be used to determine which drugs work best and which drugs could be replaced by cheaper generics. He would also like to see such an institute look into new uses for old drugs.

The institute also could take a lesson from the wars against cancer and AIDS and test combinations of drugs produced by different companies, which normally don’t have any financial motivation to work with competing laboratories.

In these days of spiraling drug costs, which are sending an increasingly aging population to Canada and Mexico for cheaper medications, the message of The $800 Million Pillis a fascinating one: that drug prices simply need not be as high as they are. It is an enlightening examination of a subject that is of great importance to us all.