Developing a new drug costs less than $100m, not $900mBMJ 2013; 346 doi: http://dx.doi.org/10.1136/bmj.f398 (Published 22 January 2013) Cite this as: BMJ 2013;346:f398
- Peter C Gøtzsche, professor1
The popular myth created by the drug industry that it costs around $1bn (£0.63bn; €0.75bn) to develop a new drug never dies,1 although it has been refuted countless times. In reply to a BMJ paper mentioning this, Stephen Whitehead, chief executive, Association of the British Pharmaceutical Industry, claimed that the true cost was $1.6bn.2
These estimates are false and build on seriously flawed methods, including debatable accounting theory. They are premised on blind faith in the confidential information supplied by the drug industry to its economic consultants at two universities who were paid by the same industry to do the job.3 4 5 In 2002 the true cost was estimated to be below $100m.3
Drug companies spend only 1% of revenues on basic research to discover new molecules, net of taxpayer subsidies, and more than four fifths of all funds for basic research to discover new drugs and vaccines come from public sources.6
The profit per unit sold has always been much higher in the drug industry than in other industries—for example, 11% in 1960 compared with 6% in all Fortune 500 companies, big pharma included.7 In the 1980s, when marketers took over from scientists in the drug industry, profits skyrocketed and were 19% in 2011. In 2002, the combined profits for the 10 drug companies in Fortune 500 exceeded those for the other 490 businesses put together.4
Price has nothing to do with what it costs to develop drugs. The pricing system builds on a cool calculus—a kind of extortion—what politicians are prepared to pay to avoid being pointed at in the news as denying patients access to drugs and thinking only of the national budget.
Cite this as: BMJ 2013;346:f398
Competing interests: None declared.