Skip to content →

The Costs of Doing Drug Research

There’s a recent Slate article which is making the rounds, especially amongst those who believe that pharmaceutical and biotechnology companies need to make less money and be more heavily regulated. The core conclusion is that the cost of R&D for a drug is not ~$1 billion as a widely cited study from 2003 established, but actually closer to $40-60 million.

imageDerek Lowe over at In the Pipeline does a great job of rebutting many of the claims in the article, but a few thoughts jump out at me:

  • The first is how anyone could have published a study like this which is off from the most recent/best estimate by a factor of 20x and not expect to see clear evidence reflected in the reality of the bio/pharma industry. Among the reasons why I think this estimate is ridiculous:
    • If the estimate were true, we’d see a lot more biotech startups (which tend to raise around that much in advance of Phase II trials) as there’d not only be a lot greater capacity for venture capital investors to fund them but also a greater likelihood that these startups can hit IPO/critical market without being bought out at an earlier stage.
    • If the estimate were true, I’d expect that instead of a “R&D productivity crisis”, we have a glut of new drugs coming out each and every year.
    • If the estimate were true, I’d expect that a company like Pfizer would, instead of boosting dividends and buying back shares, try to funnel more money into R&D – after all, isn’t it super cheap to build up a drug?
  • The second is more fundamental – why are people so focused on attacking pharma/biotechs on the purported difficulty/costliness of their R&D? I think folks like Marcia Angell who maintain that all the “real work” happens in government-funded universities and research institutions fail to understand the huge amount of screening, development, testing, and research that goes into turning something that’s only fit for an academic paper into something that’s sufficiently manufacturable, well-tested, and well-characterized to actually be useful in large scales in human beings. But even ignoring that oversight, in my mind this is attacking the wrong facet of the drug industry. From a societal well-being perspective, shouldn’t we want to praise them for their R&D? Maybe its duplicative, maybe it doesn’t even add that much value, maybe its not even as expensive as they say it is – but I think reasonable people will agree that more R&D dollars can be a good thing. To me, what we should focus on is not their R&D, but the games they play with advertising & marketing, with the intellectual property system, with not properly reporting things, etc. There are plenty of worthy things to attack the industry for – lets stop attacking them on something we actually want to see happen.

(Image credit)

Published in Blog

%d bloggers like this: