Busting myths on drug R&D
The claim of innovator drug firms that R&D costs justify high prices of patented medicines is not really valid
IN THE long-running debate on rewarding innovation versus access to medicines, pharma companies have usually managed to swing opinion and policy in their favour by making the following claims. Drug discovery is a journey fraught with setbacks, and breakthroughs are achieved at great cost. So, patents and the market monopoly they guarantee, it is argued, are essential to recoup the huge costs of research and development (R&D). Over the years, the industry has been blithely upping the cost of R&D from around $500 million in the 1990s to $1.2-$4 billion in 2013. Two years later, phrma, the American drug manufacturers’ lobby, began bandying about the figure of $2.6 billion as the cost of developing a new drug. Such a dramatic escalation was embarrassing and some phrma members did dissociate themselves from such flights of fancy, calling it a myth.
Meanwhile, a series of books had begun to lay bare many of the myths Big Pharma had surrounded itself with. The most telling was The Truth About the Drug Companies: How They Deceive Us and What to Do About It by Marcia Angell, a physician and long-time editor-in-chief of the highly respected New England Journal of Medicine. Then came The Whistleblower: Confessions of a Healthcare Hitman by Peter Rost, a doctor of medicine and ex-vice president of one of the top pharma firms, Pfizer. All of which resulted in widespread moral repugnance over the pricing policies of pharma firms.
Not that it had much impact on the industry which has unleashed extortionate prices for new cancer drugs over the past two-three years claiming that the costs of R&D had soared further. On March 31, the Washington non-profit Public Citizen, which seeks to widen access to medicines, issued a new report that showed the top drug firms were spending less on R&D although their profits were zooming. The 20 largest pharma corporations collectively posted profits of more than $100 billion each year for three consecutive years (2013 to 2015), “exceeding self-reported R&D costs for new medicines”, it said. Reflecting the general scepticism over the industry’s claims, it noted that “even the inflated estimates of R&D are dwarfed by the industry’s profits”, which jumped from $100.6 billion in 2014 to $124.7 billion in 2015.
Besides, people are being charged twice over since drug firms use the research of public funded laboratories such as the National Institutes of Health. Public Citizen is just one of dozens of organisations that have been campaigning for affordable medicines. Analysts have been pointing towards new trends in the way global drug majors are conducting their businesses without spending too much on cutting edge R&D. The biggest of these companies have been buying up smaller and younger biotechnology firms which focus on a single drug approach and have treatments that are in advanced stage of development. The best example of this is Gilead’s acquisition of Pharmasset which had developed Sovaldi, a hepatitis C treatment that now contributes hugely to Gilead’s soaring revenues.
Sovaldi is sold at a shocking $1,000 per tablet, triggering a storm of indignation from regulators, the medical fraternity and, of course, patients. Industry insiders say Pharmasset had been thinking of pricing Sovaldi between $36,000 and $72,000 for a course of treatment but Gilead, having paid an exorbitant amount to buy Pharmasset, coolly priced the medicine at $84,000 (see kMaths of Gilead’s Hep-C drugy, Down To Earth, 1-15 February, 2015) because of the patents it held and the absence of any close competitor for the drug. This has helped big companies to prosper even in difficult times as the Public Citizen report also makes clear.
A study by a consultancy found that big companies were earning more than 70 per cent of their revenues from drugs developed elsewhere. R&D is, of course, happening, but who is benefitting?