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Freakonomics of Drug R&D

Freakonomics of Drug R&D

Mental note: when a so-called scientist claims some fact in an article does not turn such fact in absolute truth.

Some recent research, studies and articles start to question if the typically claimed sky-high costs of developing new drugs are that high. My first finding in this direction came from the article The Make-Believe Billion by Timothy Noah. The main message is that according to pharma companies, the average cost they face when creating a new drug is around 1.3 Billion dollars.  The article claims it is only of 75 Million. That is what I would call a big difference, wouldn’t you? What if I say that the 1.3 Billion was calculated by the Tufts Center, which is funded by drug companies? Hmmm.

The article of Mr. Noah cites a recent article, Demythologizing the high costs of pharmaceutical research, which brings on the table nasty information about pharma companies:

  • Most of the new drugs are not so new, they are just modified versions of existing ones.
  • Only 5% to 10% of new drugs present a real advantage.
  • Companies inflate the costs of R%D.

And you might be wondering why they do this. Liberal economists, and their most popular example, Freakonomics, would say that we look at the incentives. What are the incentives of drug companies to behave like this? Higher development costs allow you to raise your selling price, which translates into more benefits. Furthermore, if it was widely known that drugs are much cheaper than we know, companies would have less excuses for not selling them at an affordable price in developing countries, where they are more than needed.

I a coming post I will talk on how these “maybe fake” high costs determines the strategies of drug companies and also the future and dreams of their workforce.

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