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Re: E-DRUG: Costs of developing drugs

E-DRUG: Costs of developing drugs

Recent E-DRUG correspondence on the costs of drugs brought an issue to mind
that has bothered me for a long time. I would welcome others' views as I may
be missing something important.  For the past 30 years I have been told
repeatedly, and in some detail, how much it costs to develop drugs. For
instance James Love recently pointed to evidence that clinical trials alone
cost $25 million to $54 million (not that he was being particularly
sympathetic to the companes!). The total development cost is a lot higher
than this.  Usually manufacturers seem to tell us this in order to justify
the high prices of their products, and I am made to believe that the public
should consider it a duty to help the company recover its development costs. 

My question is 'so what?'  Why should I care?  Don't get me wrong - I think
drugs are very important; but so are automobiles.  I don't know how much it
costs General Motors to tool up completely for a new model that meets all
the relevant safety, emission and fuel efficiency requirements, but I would
guess it approaches the cost of developing a new drug.  However General
Motors don't tell me that because of the high development costs they are
raising the price of the new vehicle by $2000.  They are operating in a real
market with tight margins and will be undercut and outsold by their

So, should we be influenced by the arguments of pharmaceutical
manufacturers?  I don't think so. For some time in Australia we have been
trying to link the price of new pharmaceticals to some measure of their
performance, not their development costs.  Agreed, the issues are complex,
but I think the approach is better than using a 'cost plus' approach, or a
scheme that guarantees a profit margin to the industry (as in the UK).  If a
manufacturer brings (for instance) a new NSAID to us, it will get a higher
price only if it can be proved to be more efficacious, or has fewer serious
side-effects, than its comparators.  However it will not, and should not,
get a higher price simply because it was developed in the 1990s, at a higher
cost than drugs developed in the 1970s.  This thinking should have been part
of the business plan of the company when it decided to take yet another
NSAID to the market.

I accept that truly innovative drugs, particularly when they are for
otherwise untreated diseases, deserve some extra support.  The public can
share the risk in several ways - by supporting the development directly, by
subsidising drug trials through drug reimbursement programs, and by being
prepared to pay more for the benefits the new drugs bring - even if they
seem quite modest initially.  However, at each point it should be clear how
the public interest is being served.

David Henry,
Discipline of Clinical Pharmacology,
Faculty of Medicine and Health Sciences,
The University of Newcastle,
Newcastle Mater Hospital,

Phone   +61 (0)49 211856
Fax     +61 (0)49 602088
Home    +61 (0)49 505576


[I think that this is an important message. The issue of drug pricing
affects every country and if prices were set on the basis of comparitive
efficacy rather than by arbitrary decisions of drug companies. 
Richard Laing Co- Moderator for May]

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