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Market insight: Prescription medicines--Costs in context
February 2016
by DDNews staff from PhRMA report  |  Email the author
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Costs are one of those things you hear a lot about in American business discussions, but perhaps few places as often as in the pharma and biotech markets—after all, companies complain about R&D costs and high rates of failure after millions (or tens of millions, or hundreds of millions) of work, patients complain about drug costs and then legislators and presidents complain about R&D costs and drug costs (since the government gives out research grants and buys medicines for Medicare patients, among other things).
 
So, for a little commentary and insight on this sector, we at DDNews turned this month to a 2016 report by the Pharmaceutical Research and Manufacturers of America (PhRMA) titled “Prescription medicines: Costs in context.”
 
Here’s some of what PhRMA had to say:
 
Prescription medicines save people’s lives and cut healthcare costs, the organization notes, but developing a drug is a challenging undertaking—and the science is only getting harder.
 
“While it may sound counterintuitive, as our understanding of science grows, so does the complexity of developing new medicines—particularly as treatments are increasingly tailored to the unique needs of individual patients,” opines PhRMA. “Failure is an inherent part of this complex process and the odds of success are low—just 12 percent of drugs entering clinical trials ever make it to patients. And thousands will not even make it past the early discovery and preclinical testing stages. That is why discovering and developing new treatment and cures is such a complex and risky undertaking. On average, it takes more than 10 years for just one medicine to make its way through the entire R&D process. And the average cost to develop just one medicine has risen to $2.6 billion.”
 
Despite these risks and challenges, though, PhRMA points out that America’s biopharmaceutical companies are tireless in their pursuit of discovering new innovative medicines to improve the lives of patients.
 
Moreover, this work and expense isn’t just money being thrown away; it is a driver of the economy, and as PhRMA notes, “The biopharmaceutical industry serves as a foundation of one of the country’s most dynamic innovation and business ecosystems.”
 
To wit: The biopharmaceutical industry supported 3.4 million jobs in the U.S. economy in 2011—814,000 direct jobs, 1,022,000 million indirect jobs (vendors and suppliers) and 1,528,000 of what PhRMA called “induced” jobs that involved additional private economic activity tied to the biopharmaceutical sector.
 
Also, the biopharmaceutical sector accounts for the single largest share of all U.S. business R&D, representing 21 percent of all domestic R&D funded by U.S. businesses.
 
In addition, PhRMA notes, the biopharmaceutical sector is the most R&D-intensive area in the United States, with biopharmaceutical companies investing more than 12 times the amount of R&D per employee than manufacturing industries overall.
 
And looking at the patient outcomes side, from PhRMA’s own metaphorical mouth: “Innovative medicines have transformed the trajectory of many debilitating diseases and conditions, helping patients live longer and healthier lives. Today, thanks in part to innovative medicines, the U.S. death rate for HIV/AIDS has fallen nearly 85 percent since its peak, and is now considered by many to be a manageable chronic disease. Through the use of innovative therapies, death rates from cancer in the U.S. have fallen 22 percent since their peak in 1991. And now two out of three patients diagnosed with cancer are living at least 5 years after their diagnosis. Therapeutic advances have also transformed treatment of rheumatoid arthritis. Medicines used to be limited to treating the symptoms of the disease. Today, medicines can target the underlying sources of inflammation, halting progression of the disease. Additionally, cardiovascular death rates have dropped 31 percent in the last decade. Today’s medicines are at the forefront of science, with many new treatments taking a targeted approach to attack underlying causes of disease.”
 
Today, more than 7,000 medicines are in development around the world. PhRMA pointed out:
 
1,813 for cancers, 1,329 for neurological disorders, 1,256 for infectious diseases, 1,120 for immunological disorders, 599 for cardiovascular disorders, 511 for mental health disorders, 475 for diabetes and 150 for HIV/AIDS.E[HH
 
The report also covered issues such as the immense amount of money that could be saved in healthcare by the introduction of new drugs and the proper use of existing drugs; the contributions of the biopharmaceutical industry to science, technology, engineering and math education in the United States; prescription drug spending trends and generic competition—among other issues. To read it in its entirety online, click here.

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