April 4th, 2011
How Big Pharma distorts the costs of developing new drugs
Los Angeles Times
Every time I come across a big-number statistic about the size or significance of some industrial activity, my nose wrinkles.
You know the figures I mean: The porn business takes in $10 billion to $14 billion a year. California’s marijuana harvest is worth $14 billion a year, making it the state’s biggest cash crop. NCAA March Madness costs employers $1.8 billion in lost productivity.
Figures like these have several things in common: They’re eye-catchingly big, they’re unverifiable by empirical means and they reek of fakery.
The statistic that may be most hazardous to your health is one pegging the research and development cost of bringing a new drug to market at $1.3 billion. Its purveyor is the Pharmaceutical Research and Manufacturers of America (PhRMA), which exploits the number’s shock value to secure its lobbying agenda on Capitol Hill.
Tax breaks for drugs for rare diseases? Faster drug approvals by federal regulators? Stronger protection against competition from generics? All these goals have been achieved, based at least partially on the claim that drug makers require huge profits to fund R&D.
The supposedly high cost of research and development is also cited to argue against the reimportation of cheap drugs from Canada and direct negotiation over drug prices by Medicare.
These arguments are backed by truckloads of cash: Big Pharma has been the biggest spender on Washington lobbying of any industry, laying out $2.1 billion over the last dozen years to get its way, according to congressional figures.
The industry’s R&D claim has been questioned for years, but seldom as thoroughly as in a recently published paper that calculates the true mean R&D cost as less than $60 million per drug in 2000 dollars ($76 million today).