E-DRUG: Cost of R&D for new medicines
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Dear Colleagues,
Below is the link to the most-read entry on the PLoS Medicine blog concerning new, high estimates of the average cost of R&D for a new medicine. This figure was developed in the mid-1970s by industry-supported economists as an artificial, high estimate in a campaign to get Congress to extend patent protections. In fact, any such estimate (including our own) is part of an artificial game that has little to do with actual costs of R&D for a given target or medicine. Still, one can learn how the high estimates are built up and how much they are built on a few, unverifiable numbers. More detail can be learned at www.pharmamyths.net, click on "Demythologizing..."
PLoS Medicine blog by Light & Warburton on Forbes estimate of “staggering costs” of R&D
http://blogs.plos.org/speakingofmedicine/2012/03/07/pharmaceutical-rds-costly-myths/ [repair link before clicking]
- And interesting comments: http://scienceblogs.com/denialism/2012/03/accountability_in_science_jour.php [repair link before clicking]
Donald Light
Princeton university, USA
dlight@princeton.edu
Donald W. Light
Cell: 609-216-0071
Professor, UDMNJ-SOM
Lokey Visiting Professor, Stanford University
Visiting Researcher, Center for Migration & Development,
Princeton University
E-DRUG: Cost of R&D for new medicines (2)
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[in response to Bonnie's question at the end, the problem is lack of transparency in the finances of pharmaceutical companies. Moderator]
Dear colleagues,
Thanks to Donald Light for this information on the cost of R&D. I think it is interesting to learn that indeed the cost of R&D is likely to be more subjective, close to an art, than a firm science. It therefore would follow, in my opinion, that any debate about R&D and how one can recover investments, also becomes a difficult one, particularly if one has no means to go into the details of each research event to establish the costs that applied therein. This is important, in my view, as the result thereof (the cost of a patent product) has a direct bearing on how affordable such a product will be, and therefore on public health.
Are these R&D costs declared any where, open to public view, etc? Is there a legal / ethical requirement to publish these R&D costs? I think it would be helpful to know if such information is available to the public, so that this debate can be better informed.
Regards,
Bonnie
Bonface Fundafunda PhD., MBA., B.Pharm
Manager, Drug Supply Budget Line
Ministry of Health,
P.O. Box 30205,
Ndeke House,
Lusaka,
Zambia
Tel: +260 211 25 41 83
Fax: +260 211 25 33 44
Mobile: + 260 979 25 29 00
Email: bcfunda@hotmail.com
E-DRUG: Cost of R&D for new medicines (3)
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To my knowledge, there is no legal requirement to report R&D costs, however different companies decide to count them up. (For an analysis of this problem, see "Extraordinary..." on the website: www.pharmamyths.net) Costs will vary greatly by the type of target, the amount of science already known, then the nature of the new active ingredient, how easy or difficult it is to run the trials and how complex they are, and how large III trials have to be to "prove" a small difference is statistically significant. (For an analysis of costs for the two major rotavirus vaccines, see "Estimated costs..." on the website: www.pharmamyths.net.)
Two basic points. The net (not gross) median (not average) corporate cost is what matters to a company and investors. For example, the National Cancer Institute here, together with pro-cancer foundations, pay for much of the basic research, translational research, and even trials; so that the net, median costs for the companies must be quite small. Why they charge staggering prices, I don't know.
Second, no one, including Rebecca and me, know the average R&D cost per new drug. Teams have been competing to see who can ramp up the estimates the most since the mid-1970s. Our article simply instructs readers on how those estimates get ramped up and what the estimated costs would be if some of them were corrected. Even corporate executives don't seem to know and repeat the mythic figures they have commissioned economists to make. But great chiefs have been embracing their tribal myths for centuries.
With best regards,
Don
PS Just completed a paper on the myth of the "innovation crisis" and on how unaffordable R&D has become.
Donald W. Light
Cell: 609-216-0071
Professor, UDMNJ-SOM
Lokey Visiting Professor, Stanford University
Visiting Researcher, Center for Migration & Development,
Princeton University
E-DRUG: Cost of R&D for new medicines (4)
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First, it’s been pretty well established that for most drugs the cost of the R&D has nothing to do with the price that companies charge. While there is some variation in the R&D costs for different types of drugs this variation is much smaller than the variation in the selling price. Selling price is based on what the companies think that the market will pay. That’s why a new NSAID will sell for a few dollars a pill and a new cancer drug for thousands of dollars per pill.
There is no legal obligation for companies to disclose the R&D costs for individual drugs. They will often announce how much they are spending on R&D overall in their annual reports but there are a number of caveats to these figures. First, they depend on what is considered R&D and second they don’t take into account the tax breaks that are often offered to companies to do R&D in certain locations. So you can get the companies version of what they spend on R&D from publications such as the PhRMA or EFPIA annual reports. If you want to see what’s being spent in the US you can look at the annual publication from the National Science Foundation and in Canada from the annual reports of the Patented Medicine Prices Review Board. Interpreting what these figures mean is much harder.
Joel Lexchin
--
Joel Lexchin MD
Professor
School of Health Policy and Management
Faculty of Health
York University
4700 Keele St.
Toronto ON
Canada M3J 1P3
Tel: +416-736-2100 x 22119
Fax: +416-736-5227
E mail: jlexchin@yorku.ca
E-DRUG: Cost of R&D for new medicines (5)
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Thanks to both Joel and Donald for the insightful information on this subjet. Your advice certainly has informed me and I am sure others too, and will help guide debate on this subject.
Sincerely,Bonnie
Bonface Fundafunda PhD., MBA., B.Pharm
Manager, Drug Supply Budget Line
Ministry of Health,
P.O. Box 30205,
Ndeke House,
Lusaka,
Zambia
Tel: +260 211 25 41 83
Fax: +260 211 25 33 44
Mobile: + 260 979 25 29 00
Email: bcfunda@hotmail.com