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[e-drug] Cost of R&D for new medicines (4)

E-DRUG: Cost of R&D for new medicines (4)

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 

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
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       

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