The costs of developing new drugs

ExpensiveRxA new analysis conducted by Forbes puts grim numbers on new drug development costs. A company hoping to get a single drug to market can expect to have spent $350 million before the medicine is available for sale. In part because so many drugs fail, large pharmaceutical companies that are working on dozens of drug projects at once spend $5 billion per new medicine.  Some caveats, though: drug companies have tax incentives to count costs in research and development, which could inflate the figure; they also are likely to spend extra money in order to get those medicines approved in other countries.

Regardless of where you are on the cost of drug development debate it has become apparent that there are a lot more factors that are coming into the mix in new drug development.   This morning’s NY Times ran an article talking about the “dry pipeline” for psychiatric drugs.  Let’s forget for a moment that this is the same publication that has actively promoted generic drugs while talking about the high cost of branded drugs, this article clearly shows one of the key changes in developing new drugs: the new drug has to have demonstrated improved efficacy over rival generic drugs or else there is a good chance insurers will not approve them for patient use.  That is the key.

When you enter the health transaction model you begin to realize that insurers have a lot more power over the drugs that physicians prescribe than drug company marketing.  I wonder how many potential breakthrough drugs were left on the table because the R&D cost were too high compared to the potential ROI?