Demythologizing the High Costs of Developing New Drugs

Gooznews
By Merrill Goozer
February 21, 2011

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 patents to recoup costs. But a new study co-authored by health economists Rebecca Warburton and Donald W. Light demonstrates that high R&D estimates have been constructed by industry-supported economists to support the companies’ claims.

The widely accepted figure promoted by industry-supported economists is $1.3 billion to discover and develop a new drug. This estimate, however, was done on a costly subsample and then generalized to all drugs, inflating the estimate for the average new drug by about 7 fold. Read more

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