One BIG Reason Why Prescription Drugs Cost So Much

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The Wall Street Journal reported on Monday that drug manufacturer Pfizer has said, “it would stop trying to discover new drugs for Alzheimer’s disease and Parkinson’s disease, avoiding costly but futile efforts to find effective treatments for the disorders.” 

That’s terrible news for at least two reasons: 

First, it is a tragic blow to the nearly 5.5 million Americans living with Alzheimer’s and the roughly 1 million Americans with Parkinson’s—and that doesn’t include the millions of people in other countries who could benefit from an effective treatment. 

Second, the likely hundreds of millions of dollars Pfizer has spent over the years trying to discover an effective treatment will be—or has been—absorbed in the price of other non-related drugs that do make it to market. 

While almost everyone grasps the tragedy of the first point, the left and the media never seem to understand the second. 

They are constantly haranguing and scolding the innovator drug manufacturers for the prices of their drugs—both the price of new releases and the price increases of existing drugs. 

And to be sure, the price of many new drugs, especially biologics, can be very expensive.  

While that price reflects the cost to develop them, it must also absorb research and development money spent on the drugs that, like Pfizer’s Alzheimer’s and Parkinson’s research, never made it to market. 

The left simply tries to calculate how much direct out-of-pocket money it thinks a company spent on developing a drug and then demands the companies lower their prices. 

That’s why IPI’s estimate of the cost of developing a new drug divides the total amount of R&D money drug companies spend in a year by the number of newly approved drugs. When we do that over a 10-year period (to level out the peaks and valleys) we found that companies spend about $1.77 billion out-of-pocket per newly approved drug.  That figure incorporates the money spent on unsuccessful drugs.

Average R&D Cost per Approved New Drug

 

Pfizer was hoping to be the company to find a cure for Alzheimer’s and Parkinson’s—or at least something that would dramatically slow the progression. If it had been successful, the world would have praised the company while the left would have grumbled about the price. There will be no thanks now, and the left will only grumble about the other drugs’ prices.

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