Profits Fuel R&D and Lead to Cures
ByAs a follow up to Nick’s post, here are some points on drug discovery and development to put things in perspective:
The average cost to develop a new drug is $802 million – $1.7 billion. Even drugs that only make it to the first phase can still easily cost the drug company over $100 million.
Most drugs that drug companies enter into clinical trials are not approved, and less and less drugs are making it to approval, and the approval rate is declining. Over 25 years, the number of drugs that entered Phase 1 trials and eventually received FDA approval has decreased from 14% to 8%. The FDA is working to increase this rate through its Critical Path Initiative, which is looking at ways to make clinical trials more efficient and determine drugs that will ultimately fail at an earlier point in the process, but it’s a government agency, so the pace of that process is exactly what you would expect. Also, there is a move to add more regulations for after a drug is approved, adding even more costs and red tape to drug development.
Most drugs are not even profitable, only 30% of drugs produce revenues that match or exceed R&D costs. Drug companies are all looking for that blockbuster drug, to get as much profit as they can before generics get onto the market – this is what fuels the huge expenditures into R&D. If Democrats take away this incentive by enacting price controls, we can expect a significant decrease in the pharmaceutical pipeline and less pharmaceutical breakthroughs.
So, the party that campaigned so hard on all the possible miracle cures they claim will come from stem cell research will try to stymie the search for lifesaving drugs. Fortunately, Democrats are not immune to lobbying by pharmaceutical companies, and this idea will likely fall to the same fate that Hillary’s national healthcare plan did in the ‘90s.
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7 Comments
November 10th, 2006 at 6:48 pm
My issue is Zyprexa which is only FDA approved for schizophrenia (.5-1% of pop) and some bipolar (2% pop) and then an even smaller percentage of theses two groups.
So how does Zyprexa get to be the 7th largest drug sale in the world?
Eli Lilly is in deep trouble for using their drug reps to ‘encourage’ doctors to write zyprexa for non-FDA approved ‘off label’ uses.
The drug causes increased diabetes risk,and medicare picks up all the expensive fallout.There are now 7 states (and counting) going after Lilly for fraud and restitution.
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Daniel Haszard
November 10th, 2006 at 8:09 pm
There’s a middle ground Jen. The pharmas are gouging the American people. No other country pays what we pay. They all negotiate prices.
I have an eye drop prescription and I was between jobs (declined COBRA) and I needed to get it filled and it cost $65. at CVS.
I went to CanadaPharmacy.com just to see and it cost $18 dollars. Plus they had a generic not approved here for $12.
Pharmas will have a new model and they’ll still make plenty of drugs.
November 10th, 2006 at 8:56 pm
OK, first of all, you were stupid to decline COBRA. And Canada may have lower drug prices, but have fun trying to see a specialist in a timely manner to get those eye drops.
That is naive to think that substantially cutting the revenue of pharma in the US is not going to effect the drug pipeline. It costs pharmaceutical companies billions of dollars a year to get only a small percentage of drugs they put into development approved – that means that even if they have to cut R&D by 10%, less drugs will come onto market.
Daniel – I don’t see what drug reps promoting off-label use has to do with controlling the price of drugs. Drug companies have to file separately for drugs to be used for different purpoes, and it is a long process to get a drug or medical device through the entire FDA process. Doctors often prescribe off-label based on studies, and they are allowed to do this. The drug reps stepped over the line, but there are other ways to deal with that besides controlling drug prices.
And FYI – you cite it being the 7th largest selling drug in the world – the FDA applies only to the US, other countries have their own agencies.
November 10th, 2006 at 9:14 pm
Excellent post and response to comments, Jen. Might I add in response to anonymous, that drugs may be cheaper in Canada, but many drugs are also not available in Canada. The Canadian government controls prices, volume and what drugs are available. I’ll take our free market any day. It’s enough that regulatory complaince has resulted in the average cost of bringing a drug to market equalling $800 million, I don’t want the government getting anymore involved.
November 11th, 2006 at 12:53 am
Any time you control the price of something it has a negative impact whether it’s drugs or anything else.
If the government told Intel what to charge for their chips, what do you think the impact would be? Inovation would slow to a crawl.
November 11th, 2006 at 3:40 am
For a three month lapse in coverage, where I would be paying $360 a month for coverage, it was worth not taking the Cobra. It wasn’t stupid. COBRA is another area the government needs to reform.
I don’t know what doctors you see Jen, but it takes weeks for me to get appointments with a specialist now – so making out that our system is so much more wonderful and accesible is a huge stretch. Most of the time when I get sick I wind up going to an immediate care place because by the time I’d get an appointment with my doctor or any doctor I’d be dead.
The Democrats are looking to negotiate prices, like other countries, not dictate prices. You’d think business Republicans which most of you seem to be would applaud that.
We already do it for VA benefits, we should be doing it for Medicare Medicaid.
They weren’t kidding when they said the Republicans are no longer, nor ever have been, the party of fiscal responsibility.
November 13th, 2006 at 2:22 pm
From today’s WSJ
“Congressional Democrats need to be careful in making the logical leap from market share to bargaining power. Empowering the government to negotiate with pharmaceutical companies is not necessarily equivalent to achieving lower drug prices. In fact, neither economic theory nor historical experience suggests that will be the outcome. Members should think carefully before jumping on the bandwagon — this promise may bring just the opposite of what was ordered.”
http://online.wsj.com/article/SB116337445442621059.html?mod=opinion_main_commentaries