First, research and development (R&D) is a relatively small part of the budgets of the big drug companies—dwarfed by their vast expenditures on marketing and administration, and smaller even than profits. In fact, year after year, for over two decades, this industry has been far and away the most profitable in the United States. (In 2003, for the first time, the industry lost its first-place position, coming in third, behind "mining, crude oil production," and "commercial banks.") The prices drug companies charge have little relationship to the costs of making the drugs and could be cut dramatically without coming anywhere close to threatening R&D.
Second, the pharmaceutical industry is not especially innovative. As hard as it is to believe, only a handful of truly important drugs have been brought to market in recent years, and
they were mostly based on taxpayer-funded research at academic institutions, small biotechnology companies, or the National Institutes of Health (NIH). The great majority of "new" drugs are not new at all but merely variations of older drugs already on the market. These are called "me-too" drugs. The idea is to grab a share of an established, lucrative market by producing something very similar to a top-selling drug. For instance, we now have six statins (Mevacor, Lipitor, Zocor, Pravachol, Lescol, and the newest, Crestor) on the market to lower cholesterol, all variants of the first. As Dr. Sharon Levine, associate executive director of the Kaiser Permanente Medical Group, put it,
If I'm a manufacturer and I can change one molecule and get another twenty years of patent rights, and convince physicians to prescribe and consumers to demand the next form of Prilosec, or weekly Prozac instead of daily Prozac, just as my patent expires, then why would I be spending money on a lot less certain endeavor, which is looking for brand-new drugs?<4>
http://www.nybooks.com/articles/17244Pharmaceutical companies dramatically overprice life-saving drugs and justify doing so by citing research and development costs. This argument, constantly used by these companies and also by Mr. Nesmith in his column, has been repeatedly debunked. And yet, it is made over and over again.
Drugs are expensive, say the pharmaceutical companies, because of the years of research and failed trials that go into making a successful drug. However, they neglect to mention that up to 50% of the research and development cost in the world is incurred by the public sector. Tremendous amounts of drug research is funded by university funding and government grants.
But when putting a figure to the R&D costs, pharmaceutical companies include these public sector costs as if they were their own. This inflates the stated expenditure associated with R&D per drug for a company and provides an artificial justification for extremely high prices. To burst another drug company bubble, I should include that these companies spend more on marketing and administration than on R&D. It basically goes without saying that the pharmaceutical industry has been one of the most profitable industries in the nation for several years straight.http://www-tech.mit.edu/V123/N41/shef_colum.41c.htmlMaybe some of DU's top-notch researchers can find more articles supporting these two opinions.