R&D Costs and Productivity in Biopharmaceuticals (see more papers at www.hks.harvard.edu). The paper is not really complicated, it only wanted to find out, among others, to what extent the costs in pharma R&D have increased so far, the increasing procedures required to get regulatory approval, and so on. But it is significant because it's a very recent paper, produced only last month, from the famous Harvard Kennedy School.
An alternative and more authoritative source to get info about R&D costs of pharma and biotech companies will be that of the Pharmaceutical and Research Manufacturers of America (PhRMA), infographics section, http://www.phrma.org/research/infographics.
The author compared independent research of cost estimations from other sources. He wrote,
... cost per successful new molecule. There have been numerous quantitative investigations. The leading efforts, and those most highly cited in both the scientific and popular literature, have come from collaborating economists at Tufts University, the University of Rochester, and Duke University...
For the most recent of the comprehensive Tufts University studies, the estimated average out-of-pocket cost per successfully approved molecule, including the pro-rated costs of failed tests, all measured in year 2000 purchasing power levels, were as follows:Pre-clinical $121 millionClinical testing $282 millionTotal cost per approved drug $403 million
The mean clinical testing estimates, which are undoubtedly more reliable than pre-clinical estimates, can be compared with the analogous costs from three earlier studies summarized by Scherer (2010, p. 154), each adjusted to year 2000 purchasing power levels:
Mansfield Late 1950s $ 5.4 millionSource Test Period Average out-of-pocket cost per approved new drug
Clymer Late 1960s 40.2 million
Tufts I 1970-early 1980s 65.7 million
Tufts II 1983-late 1990s $282 million
That's a rising trend indeed in R&D cost. The main cause of such explosion in costing would be the rising tests and procedures required by the regulatory agency, the US FDA, before they will approve any new drug molecule.
Given the complexity and high risks, high costs involved in developing new medicines and vaccines, it is indeed unfair that successful drugs will be slapped with certain government interventions that effectively penalize, instead of rewarding, new medicines innovation. The author did not mention in his paper anything about such threats in intellectual property rights (IPR) of medicine discovery, but readers and observers who are keen on slapping patent-abrogation government policies like compulsory licensing (CL) and related measures, or be imposition of medicine price cap and control, are not likely to believe the high risks and costs involved in drug discovery. They only see the angle of "patented drugs = expensive drugs". Thus, to bring the prices of those more powerful and new drugs, patent life should be kept as low as possible.
This attitude is not healthy not only for the research and pharma companies, but more so for the patients today and tomorrow. We have read and seen cases of ever-evolving and mutating diseases. Such disease mutation are not likely to be effectively treated by old and existing medicines and vaccines, but by new and more modern ones. And it is also very likely that FDAs will be imposing new and more stringent rules and procedures before they approve new medicines and vaccines. In a situation of rising requirements and regulations, costs will also be rising and hence, prices of new drugs and treatment will be rising. Governments should in fact reduce costs-inflating policies like taxes on medicines as they raise the regulations to make future drugs more safe and more effective in killing diseases.
IPR and medicines, Part 1, March 04, 2011
IPR and medicines, Part 2,
IPR and medicines, Part 3,
IPR and medicines, Part 4,
IPR and medicines, Part 5, March 14, 2011
IPR and medicines, Part 6, March 15, 2011
IPR and medicines, Part 7
IPR and medicines, Part 8, March 31, 2011
IPR and medicines, Part 9, June 08, 2011
IPR and medicines, Part 10, July 13, 2011
IPR and medicines 11: When blockbusters' patent expires, September 07, 2011
IPR and medicines 12: Expanding generics, September 09, 2011
IPR and medicines 13: Improving Generics Quality, September 13, 2011
IPR and Medicines 14: Compulsory Licensing in developing countries, October 04, 2011
IPR and Medicines 15: New Vaccines and Public Health, November 05, 2011
IPR and Medicines 16: Wikileaks and the Cheaper Medicines Law, November 08, 2011
IPR and Medicines 17: Why are Drugs Still Expensive After Patents have Expired?, November 17, 2011
IPR and Medicines 18: Generic Drugs and the Consumers, November 18, 2011
IPR and Medicines 19: Miracle Anti-Cancer Drug?, January 04, 2011