Pills on a US dollar bill

Megafunding Drug Research

As price-gouging practices by a handful of drug companies attract headlines, one troubling aspect of the story remains underplayed. Exorbitant increases in the prices of existing drugs, including generics, are motivated not just by crass profiteering but by a deep skepticism about the economic feasibility of developing new drugs.

SEATTLE – As price-gouging practices by a handful of drug companies attract headlines, one troubling aspect of the story remains underplayed. Exorbitant increases in the prices of existing drugs, including generics, are motivated not just by crass profiteering but by a deep skepticism about the economic feasibility of developing new drugs. That skepticism is justified.

Traditional models for funding drug development are faltering. In the US and many other developed countries, the average cost of bringing a new drug to market has skyrocketed, even as patents on some of the industry’s most profitable drugs have expired. Venture capital has pulled back from early-stage life-sciences companies, and big pharmaceutical companies have seen fewer drugs reach the market per dollar spent on research and development.

Indeed, on average, only one of every 10,000 compounds identified as potentially useful in early-stage research will ultimately win approval from regulators. The approval process can take as long as 15 years and errs on the side of caution. Even among drugs that make it to human clinical trials, only one in five will clear that final hurdle.

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