It’s time to get real here. The production cost of almost all drugs is so close to zero that it can usually be ignored. The real cost is totally due to government regulation. It costs on the order of a billion dollars to bring a new drug to market. That’s BILLION, with a B. Unless you include that cost, don’t waste my time. And don’t whine about drug company gouging you unless you can show me a drug company that earns an extraordinary net profit.
For the first time I became aware of the tremendous costs and time (an average of 12 years) and effort involved in getting a new drug from the lab, through all the various trials- first the animal trials and finally, only if it makes it that far in the FDA approval process – human trials and then patient clinical trials, to getting FDA approval and then post approval monitoring for any and all side effects (whether actually attributable to the drug or not ) and which can last for many, many years and has to be under FDA rules, outsourced to an impartial 3rd party and BTW, at no small cost.
And most people are largely unaware that a large number of drugs that enter clinical trials don't actually ever get approved by the FDA. That’s not to say that these drugs are necessarily “bad” or harmful or ineffective. Sometimes the FDA will not outright reject a drug but send it back to the pharma for further research and additional trials, or sometimes on a minor technicality over claims of efficacy or sometimes for reasons not completely understood or even well supported against approval by the science or clinical trial outcomes.
I used to see and process for payment invoices for lab equipment and supplies (and guess what – not cheap) and some equipment was in fact so expensive that (and as I am sure many other pharmas and biotech firms do) we did not really purchase some pieces of high tech equipment but entered into capital lease – purchase – lease -buy back arrangements to keep much needed cash flow flowing. Then there are the specialized computers and computer software, the cost of the clean rooms and maintain them, and then the highly specialized manufacturing equipment and packaging, the cost of quality control…. the costs I saw were staggering. I had no idea before that the costs were so high.
I also saw and processed the invoices for animal trials, sometimes to the tune of a half million $ at a time. My department’s weekly AP check run was well over three million dollars and our semi-monthly net payroll was close to a million. And we were a rather small pharmaceutical company – we only employed about 250 people and another 25 in sales and marketing nationally and internationally.
And FWIW, while we had a small on-site animal lab (only mice and rats), a lot of our animal trials were outsourced and IIRC, that is actually required by the FDA, but because of animal “rights” wackos here in the US, we outsourced a lot of it (rabbit, dog and primate trials) to Europe – mostly to The UK, France and The Netherlands. But as I understand, it is becoming increasing difficult and hostile and more expensive for these companies to operate these much needed and necessary research anywhere in the world and there are fewer and fewer of them so of course those costs are ever increasing.
FWIW – while the company I worked for didn’t produce any “fun” drugs, i.e. the types of drugs that people get “high” on, we had armed security guards 24-7 at each of the entrances to our two buildings and high tech security systems – swipe badges that limited access to certain areas of the building - the labs and animal labs. Part of that need for security was because of threats of physical violence, bombings, etc. that had been made by ELF and PETA and other extremist groups. When I was hired, even as I was working the finance department, I had to undergo a rather extensive background check as did all our employees, in part because of the very real fear of unknowingly hiring an animal “rights” activist.
And speaking of the payroll costs, yes, it was shocking to me coming from a background in smaller, mostly in engineering/architecture and construction companies, seeing what some the high level executives; the CEO, CFO and various VP’s made. But then again, that made up only a small percentage of our total payroll. Biochemists, chemical scientist, molecular biologists, toxicologists and pharmacologists, especially those with PhD’s don’t come exactly cheap and in a highly competitive market, even as a smaller pharma, we had to compete for talent with much bigger firms in terms of salary and benefits and incentives and the expenses of recruiting them.
When I worked at this pharmaceutical company, after having been in business for just shy of 10 years, we only had one FDA approved drug that we marketed and sold - a very specialized implantable chemo therapy wafer used to treat Glioblastoma multiforme brain cancer and one drug close to getting FDA approval, a drug for the treatment of acute coronary syndrome. We had many other drugs in the R&D pipeline and several others that never got anywhere but at the cost of millions of dollars in R&D, but only one that was producing anywhere near a positive cash flow and given the upfront costs in getting that drug from the lab to FDA approval over a ten year period, we were not anywhere near recouping those costs. So yes, the price of that drug was not cheap. Then again, we also had a program as do many other pharmaceutical companies, in which we donated at no cost to the patient, the drug to treat Glioblastoma multiforme cancer to patients who needed it but either did not have insurance or their insurance company would pay for it. Sure, part of that was for the positive PR we go for doing so, but it was also because our CEO was an MD, and a neurosurgeon and who had seen up close and personal, the devastating effects of Glioblastoma multiforme brain cancer and really wanted to find an effective treatment.
Cost to Develop New Pharmaceutical Drug Now Exceeds $2.5B
http://www.ca-biomed.org/pdf/media-kit/fact-sheets/cbradrugdevelop.pdf