R & D Costs Not As High As Drug Companies Claim

Pharmaceutical companies continue to claim that high research and development (R&D) costs make it necessary for them to charge high prices and retain long ownership of their patents to recoup costs. But a new study, Demythologizing the high costs of pharmaceutical research, co-authored by University of Victoria health economist Rebecca Warburton with lead author Donald W. Light of the University of Medicine and Dentistry of New Jersey demonstrates that high R&D estimates have been constructed by industry-supported economists to support the companies’ claims.
        “The true R&D costs are really quite wide-ranging and yet it’s widely accepted, even by skeptics of the pharmaceutical industry, that R&D costs are uniformly high,” says Warburton.
        Referencing the most expensive kinds of drugs, ignoring R&D-related tax write-offs, overstating average development times and the risk of failure, and using high interest rates for the “cost of capital,” are among the ways costs can be biased upward, says Warburton.
        This latest analysis updates previous studies to make the information more accessible. “Canadians are about to pay about $2 billion more for their drugs because the European Parliament is increasing market protections based on widely held beliefs about the cost of R&D. This will delay generic competition and extend monopoly prices,” adds Warburton. “Even more troubling, the incentives of our current patent system do not favour development of breakthrough drugs that truly benefit patients, but instead favour development of profitable yet poorly tested products that in many cases are riskier than the older drugs they replace. Worldwide, preventable adverse drug events cause millions of preventable deaths and hospitalizations annually.”
        The article has been printed in BioSocieties, an interdisciplinary journal for the social studies of life sciences. It is available at www.palgrave-journals.com/biosoc/journal/vaop/ncurrent/index.html

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