"More than $2billion to bring a drug to market" - Big Pharma bullshit

Have been doing a bit of reading about Big Pharma (as they call it) in the US, and their claim that they need huge profits as it costs so much to bring a drug from the raw material, through research and development, and finally into the market. Current estimates by the drug companies (based on their own research of course) is well over 2 billion $. This is from the Tuft institute, the Pharma funded research thingy.

*coughs*  That sounds just fuckin out there. How in the hell could it cost that much? So I did a bit more reading and low and behold I came across this article from way back in 2011 when the Tuft people's estimate to get a drug to market was a mere $1.3billion or so (wow, doubled in 4 years? That's a big inflation rate eh). And surprise surprise, they were calling bullshit on that figure back then too, saying the average cost of getting a drug to market was more like $55million. I kid you not.

For example, one thing that was added into the cost of putting money into R&D were the lost profits that it may have gotten had the money gone into the stock market instead. Yes, lost profits that may or may not have even happened FFS! 

Another problem Light and Warburton have with the Tufts Center group is that they didn't subtract from their R&D calculations pharmaceutical firms' tax breaks. Research and development costs, they point out, are not depreciated over time like other investments; rather, they're excluded entirely from taxable profits. This tax break lowers net costs by 39 percent. Add in other tax breaks and that cuts the Tufts Center group's R&D estimate in half. 

Now take that figure and cut it in half again, Light and Warburton say, because half the Tufts Center group's estimate was the "cost of capital," i.e., revenue foregone by not taking the money spent on R&D and investing it in securities instead. But R&D is a cost of doing business, Light and Warburton point out; if you don't want to spend money on it, then you don't want to be a drug company. And who says that investing in securities always increases your capital? Sometimes the market goes down. Many of us learned that the hard way in 2008. 

There are other problems. The Tufts Center group's per-subject calculation of how much clinical trials cost was six times that of a National Institutes of Health study. Its calculation of how much time it takes to conduct clinical trials and have them reviewed by the Food and Drug Administration—7.5 years—is twice as long as Light and Warburton's calculation, which is less than four years. The Tufts Center group's use of the average (mean) cost rather than the median cost, Light and Warburton argue, is also misleading, because R&D costs for different drug products vary widely, and a very few expensive drugs will skew the mean. That appears to have happened in this case, because the Tuft Center group's median was only 74 percent of the mean. 

When Light and Warburton correct for all these flaws—well, all the ones that can be quantified—they end up with an average cost of bringing a drug to market that's $59 million and a median cost that's $43 million. In 2011 dollars, that's a $75 million average and a $55 million median. 

So the drug companies' $1.32 billion estimate was off, according to Light and Warburton, by only $1.265 billion. * Let's call it a rounding error. more