Drug costs: research and development costs: the great illusion

(1) The commonly stated average cost of researching and developing a new drug is 802 million dollars. (2) This figure comes from an institute largely funded by the pharmaceutical industry, and is based on confidential information also provided by industry sources. (3) It includes the cost of failures and financial charges, and is the pre-tax figure. Out-of-pocket spending actually represents only half this sum, and the true costs are halved again when tax is deducted. A detailed analysis of this estimate reveals many other methodological flaws. (4) This estimate only concerns new chemical entities entirely developed by the company in question. (5) It is based on clinical development costs which are far higher than those quoted by other sources. (6) Drug companies claim this estimate is the "official" figure. (7) Data on the many drugs that are not fully developed by the company in question are even less consistent. (8) The true costs of research and development must be determined transparently if national authorities are to make rational decisions on patents, data protection, and drug pricing. (9) Research and development costs must be viewed in the light of drug company profits, which remain the highest of any economic sector.