R&D Costs Overstated by Drug Makers, Public Citizen Says
Although the pharmaceutical industry maintains that research and development for each new drug totals $500 million, a new report by Public Citizen puts the cost at about $110 million, the Boston Globe reports. Public Citizen's report dissected the methodology of a 1991 study by Joseph DiMasi of the Tufts Center for the Study of Drug Development, from which the oft-cited $500 million research and development figure was derived. Public Citizen concluded that the $500 million includes tax-deductible expenses and "unrealistic estimates of risks" and "dowplay[s]" taxpayer funding of research (Bayot, Boston Globe, 7/24). According to an internal NIH document obtained by Public Citizen, taxpayer-funded scientists conducted 55% of the studies that led to the discovery and development of the top-five selling drugs in 1995, reducing drug companies' costs (Lueck, Wall Street Journal, 7/24). The Public Citizen report also says that the DiMasi study focuses only on the "most expensive drugs, not all new drugs" -- many of which are combinations of existing drugs or new dosage forms -- meaning that the cost estimate is higher (Boston Globe, 7/24). Frank Clemente, director of Public Citizen's Congress Watch, said, "The drug industry is stealing from us twice. First, it claims that it needs huge profits to develop new drugs, even while drug companies get hefty taxpayer subsidies. Second, the companies gouge taxpayers while spending millions from their profits to buy access to lawmakers and defeat pro-consumer prescription drug legislation" (McQueen,
AP/Bergen Record, 7/24). A second report released by Public Citizen yesterday states that the drug industry spent $198 million in lobbying during the 2000 election cycle; the "closest competitor" was the insurance industry, which spent $169 million (Fulton, CongressDaily, 7/23).
Pharmaceutical Research and Manufacturers of America spokesperson Jeff Trewhitt said the drug industry group "stands behind" the $500 million figure, adding that the estimate "may even be conservative" (Wall Street Journal, 7/24). According to Christopher Molineaux, PhRMA's vice president for public affairs, a Lehman Healthcare study estimates drug development costs to be $675 million per drug, and a Boston Consulting Group study projects that drugs being developed this year will have costs between $590 million and $880 million. The Globe reports that the "conflicting estimates" are the result of "different definitions of what qualifies as research and development" (Boston Globe, 7/24). PhRMA also maintains that Public Citizen "confus[ed]" NIH-funded basic research with applied research and development funded by drug companies, Trewhitt said. He added that while drug companies "capitalize" on basic theories developed by NIH, the companies make the "dramatic jump from a basic theory to a product" (Ranii, Raleigh News & Observer, 7/24). Public Citizen's research and development costs study is available at http://www.citizen.org/congress/drugs/R&Dscarecard.html and the lobbying costs study is available at http://www.citizen.org/congress/drugs/pharmadrugwar.html.