I'm not really all that mysterious

The Myth of Pharmaceutical Innovation

Despite the passage of the ACA and despite reams and reams of analysis papers, the task of containing costs still seems wildly out of reach.

One of the frequently criticized sectors is the pharmaceutical industry.

It’s a well known meme that U.S. pharma makes vast profits compared to pharma companies in the rest of the world. (This is not strictly true, as most large pharma companies are actually multinational corporations.)

Many argue that since it’s so expensive to fund research and development, and new drugs can save a lot of lives, pharmaceutical companies should have a right to charge whatever they need to in order to at least break even or make a modest profit.

But many sources suggest that the idea that R&D costs are what are hobbling innovation may just be a myth.

Medications that make the biggest impacts tend to be the ones that make the least profit. U.S. pharma companies have all but abandoned antibiotics because the time for bacteria to develop resistance is too short for them to make any profits. And yet antibiotics have major impacts on morbidity and mortality.

Drug design is unfortunately a lot like roulette. One success will make shareholders exceedingly wealthy but one failure can utterly bankrupt all but the biggest pharma company and there’s no real way to tell what’s going to work and what’s not without doing the trials. So to make money, a lot of pharma companies just make tweaks to existing meds in order to extend patents, even if the benefits are marginal or essentially nil.

If anything, the broken way patents work in this country contribute to how expensive meds are.

(crossposted on Facebook)

Pharmaceutical research and development: what do we get for all that money? • 2012 Aug 7 • Donald W Light and Joel R Lexchin • BMJ

Data indicate that the widely touted ‘innovation crisis’ in pharmaceuticals is a myth. The real innovation crisis, say Donald Light and Joel Lexchin, stems from current incentives that reward companies for developing large numbers of new drugs with few clinical advantages over existing ones.

Explaining Research – Drug Company Expenditures Part 1 • 2009 Oct 25 • Aaron Carroll • The Incidental Economist

So it’s a little disingenuous to claim that Americans must continue to spend so much to fund R&D when you could make cuts to either profits (which are big) or to marketing and administration (which is gargantuan). R&D just isn’t that big a piece of the pie. There’s plenty of fat to trim in there before research and development.

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