Much is written about the cost of prescription drugs in the U.S. and possible alternative pricing strategies, including importation of “less expensive” drugs from our neighbor, Canada. Unfortunately, there is no easy answer to this dilemma. Government-controlled drug-pricing is not the answer. In fact, government-controlled pricing (in Canada, the countries of Europe, Japan, and other “developed” countries) has largely contributed to our present issues. With prices controlled by government in those countries, “big pharma” is left principally with the U.S. as the only free market for drug pricing where they can recover real costs. In that scenario, patients and insurers in the U.S. effectively subsidize patients in the rest of the world.
Despite illusions to the contrary, the U.S. government does not generally subsidize big pharma for research and development of new drugs. Through the NIH, the U.S. government does fund some very early basic drug research in the laboratory for discovery of new chemical entities (NCE’s). A typical government-funded laboratory project to discover and initially test an NCE can cost from several tens of thousands of dollars to a few hundred thousand dollars. NCE’s emerge from both federal government-funded laboratories and from big pharma.
However, after initial discovery, NCE’s must undergo extensive pre-clinical (animal) and clinical (people) testing (advanced development) before they can be approved for marketing in the U.S. by the FDA. The U.S. government provides little funding for advanced R&D of new drugs. Such R&D is principally funded by big pharma.
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On average many thousands of NCE’s enter “advanced development” before a single new pharmaceutical or biological agent (requiring extensive, demanding, and complex pre-clinical and clinical testing) can be successfully submitted to the FDA for marketing approval. Costs for such advanced development typically run into billions of dollars and many years (10 to 15) before a drug can be marketed to physicians and patients. During that time, patent life (19 years) is running out, and a drug company may have only a few years to recapture development costs before the patent has expired and “generic” versions of the drug can be manufactured and sold by other manufacturers. Additionally, the number of patients for whom the drug is indicated may be limited, perhaps as few as several hundred patients per year. Hence, individual patient costs may be very high: i.e., a few billion dollars of development costs must be recaptured from a relatively small patient population over a few years.
It’s helpful for all of us to understand the realities and dynamics of drug development and marketing before making demands on the pharmaceutical industry and drug pricing that may make future drug development unsustainable. I.e., if the demands that we see daily to lower drug costs in the U.S. to the levels we see in Canada or Europe come to fruition, we may have to say goodbye to new miracle drugs (or medical devices) in the future. Our dilemma is not a simple problem attributable to “greedy” pharmaceutical companies that can be solved by government control of drug prices. Government is not the answer. Government may be part of the problem.