Lifting the Veil on Drug Pricing

March 2, 2015
Adeline Siew, PhD

Adeline Siew is editor for Pharmaceutical Technology Europe. She is also science editor for Pharmaceutical Technology.

Every now and then, you will hear about the rising costs of R&D, which in turn, translate into high prices for new drugs entering the market.

 

Every now and then, you will hear about the rising costs of R&D, which in turn, translate into high prices for new drugs entering the market. Of course, with the blockbuster model becoming obsolete and the pharmaceutical industry shifting focus to personalized medicines, one can only expect drug prices to hit the roof.

Cost is always a controversial matter that sparks questions regarding affordability and sustainability. Now if you’ve ever wondered how drugmakers come up with a price tag for their product, there is a possibility that the veil may be lifted. The United States could be leading the way in a push for greater transparency in drug pricing as assembly member and San Francisco democrat David Chiu introduced a new bill (AB 463) requiring pharmaceutical companies to disclose information on how they set the price tags for new drugs (1). If this law is passed, the manufacturer of any course of treatment costing $10,000 or more per year must report the production costs for the drug, which include R&D costs paid by the manufacturer or by grants; clinical trial and other regulatory costs; financial assistance offered to patients through various programmes; manufacturing costs; acquisitions costs such as licensing fees or the purchase of patents; total spend on marketing and advertising; and profits attributed to the drug.

A recent report by the Tufts Centre for the Study of Drug Development estimates that, on average, it costs $2.6 billion to bring a drug to market (2). Whether or not it is a myth or fact, this figure has caused disputes with critics accusing the industry of using R&D cost as an excuse to mark up drug prices. Perhaps the new transparency act on drug pricing will clear up some of the confusion and serve as an eye opener as to why our medicines cost so much. And it would be interesting to see if Europe will follow suit.

References
1. AB 463 Pharmaceutical Cost Transparency Act of 2015, accessed 2 Mar. 2015.
2. Tufts CSDD, Cost to Develop and Win Marketing Approval for a New Drug is $2.6 Billion, Press Release, 18 Nov. 2015.

About the Author
Adeline Siew, PhD, is the editor of Pharmaceutical Technology Europe, asiew@advanstar.com.

 

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