Drug Development Costs about 1 Billion Dollars US per Drug?

kugs4ever · New User Joined: 18 Feb 2008 Posts: 4

This was stated in an article in the Wall Street Journal by the
CEO of a drug company. I can't imagine where all this money goes. Is
this a bogus statement or has a drug company shown its cost accounting
for drug development? If it is true, there has to be something very
wrong with regulations...

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Including opportunity cost in the figures is b.s. How is that
defined? I assume they tack a 'revenue flow for a drug that is fast
tracked to market and made about $998,000,000 so the real spend on
development is around $2,000,000. Pharma is corrupt just like the US
government.

Vee Smith · Moderator Joined: 12 Feb 2006 Posts: 796 Location: UK

Well, this is what Wikipedia has to say: http://en.wikipedia.org/wiki/Drug_development#Cost

I don't think anyone, including the pharmaceutical companies, is particularly happy about the costs, but when you look at the length of time it takes to investigate all aspects of a drug, develop it to the point of testing, run laboratory tests and then human tests, and assess the benefits [if any], plus the continuing research into uses and side-effects, it certainly cannot cost as little as $2 million.

kugs4ever · New User Joined: 18 Feb 2008 Posts: 4

[quote="Vee Smith"]Well, this is what Wikipedia has to say: http://en.wikipedia.org/wiki/Drug_development#Cost

I don't think anyone, including the pharmaceutical companies, is particularly happy about the costs, but when you look at the length of time it takes to investigate all aspects of a drug, develop it to the point of testing, run laboratory tests and then human tests, and assess the benefits [if any], plus the continuing research into uses and side-effects, it certainly cannot cost as little as $2 million.[/quote]

Do you know what "opportunity cost" is? This is not a cost that business can deduct from gross margin to determine profit. http://en.wikipedia.org/wiki/Opportunity_costs So to report this as part of actual costs is complete B.S. I still want to see a cost accounting for an example drug development but you won't find one because the Pharma figures are B.S. and used to justify high insurance payments.

brainman

I will jump in to this discussion Very Happy

.

Since I do not have access to the Wall Street Journal, I am kind of talking in the dark. However, opportunity cost cannot be reported on a financial report. It is just a tool used by a company to make a decision about what direction to go with its assets. Say I own a company and have two options: Develop product A or B. Both will cost me the same amount to develop but I can make 2X from product A and X from product B. Then steps in big brother (government or my own sense of ethics) and tells my that B is of much more value to the world than A is. By making the choice to produce product B, I theoretically (just on paper) loose X dollars. That is "opportunity cost." I know that the pharmaceutical company that I worked for received government funding to offset this Opportunity Cost or it would have made the decision only to make what was most profitable to it. I think they had to make annual financial reports to the government but I do not know if those reports where public record or not (way above my pay grade). But those would not include Opportunity Cost except to justify continued funding of certain products.

Clear as mud, right? Laughing

Oh, and it does cost millions and millions for a pharmaceutical company to go from a idea to final product. I might sound like a hypercapitalist; I am not. I do look at CEO's and wounder how they can justify making so much money. But I can do the same with athletes, actors and actresses... if fact, anyone making billions of dollars. Oh well, enough politics for one day Wink

.
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kugs4ever · New User Joined: 18 Feb 2008 Posts: 4

I am not arguing that it is not expensive to develop drugs (though a lot of the basic science is funded by taxpayers in Universities). But I am very familiar with cost accounting and have a hard time fathoming how it could cost $1B. Until I can see a cost accounting to justify this claim (yes, it is claim), I will think it is B.S. Not surprising considering our government is bought and sold. Oh, and the patent system is a joke.

Vee Smith · Moderator Joined: 12 Feb 2006 Posts: 796 Location: UK

Buy some shares in the companies and you will have access to their accounts.

In fact, if you are prepared to pay, the accounts of any public company are available.

kugs4ever · New User Joined: 18 Feb 2008 Posts: 4

I doubt the financial statements will have a cost accounting of drug development. Exclamation

brainman

If it is a publicly held company, there is a general financial statement sent out to all share holders but there is also a much more detailed financial statement sent out upon request by a shareholder. In addition, if they receive any government help, they have to give a detailed report to the government about their use of public funds. Those are 2 resources available to you (and to the Wall Street Journal Wink

)
_________________
Jim
Site Administrator and long-term cancer survivor
1992 Astrocytoma grade 2, left motor strip
2005 Recurrence this time said to be an Oligodendoglioma grade 3, same location.
My Story Part 1: http://cancerforums.net/viewtopic.php?p=7350
My Story Part 2: http://cancerforums.net/viewtopic.php?t=8029
Blog http://jimhawkinsport.blogspot.com/

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