A Catalyst for Debate

PhRMa R&D Costs Are Much Lower Than Claimed

22 February 2011


For decades, the pharmaceutical industry has claimed that its high prices
for drugs in the developed world, are justified by the very high costs of
research and development (R&D). Industry-funded economists at Tufts Center
for the Study of Drug Development, produced a wholly artificial R&D cost of
$1.3 billion for a new drug. That artificial estimate, which is widely cited
by government and industry-- has served to hugely enrich the pharmaceutical

A just published article, Demythologizing the High Cost of Pharmaceutical
Research, by Donald Light and Rebecca Warburton, debunks industry's inflated
claim by dissecting the calculations in the authoritative Tufts-PhRMa
supported study that concocted the extraordinary high R&D cost estimate.

Light and Warburton found that the net median corporate R&D costs varied
greatly: from $13 million to $204 million, depending on the kind of drug.
They estimate the median net corporate R&D cost per new drug was only $59.4
million, plus the unknown cost of discovery, which varies 30 fold.  This
$59.4 million estimate, they point out, is in line with audited figures
submitted by companies.

The Tufts authors who concocted the $1.32 billion estimate, failed to
include the substantial contributions by US taxpayers through R&D-related
tax write-offs. Taxpayers indirectly pay for about 39% of company R&D
cost--and then get hit by inflated costs.

Read more...Excerpt posted at: http://www.ahrp.org/cms/content/view/769/9/

Contact: Vera Hassner Sharav