Why are Prescription Drugs Expensive

chillibreeze writer — Jumana Barnagarwala

Introduction

Pharmaceutical and biotechnology companies need to make huge investments in the discovery of a single drug that may cure a disease or simply alleviate the symptoms of another. These are businesses like any other and profits fuel their growth and provide the investments for future discoveries.

The Myth about Pricing of Prescription Drugs

"The common assertion is that prescription drugs are costly because drug companies need to recover the high costs of research and development (R&D) that went into their development. The industry has used a figure of $800 million as the average cost of bringing a pharmaceutical compound through screening, chemistry, pre-clinical development and clinical testing. It's a fallacy to suggest that [the pharmaceutical industry or] any industry, prices a product to recapture the R&D budget spent in development. Business doesn't work like that. Those are sunk costs. In other words, [pharmaceutical firms] spent the money and it cannot be recovered no matter what [they] decide to do with pricing."

Those are the words of Pfizer Inc. chairman and CEO Hank McKinnell in his book "A Call to Action: Taking Back Healthcare for Future Generations" published in May 2005.

The Journey of Drug Discovery and Development

Even as we shatter the myth that prescription drugs are expensive because pharmaceutical or biotechnology companies need to recover the investments made in discovering a single useful drug, we do need to appreciate the painstaking effort that goes into it.

So, how long is this journey of drug discovery; what are the various steps involved and what are the chances of discovering a single useful drug?

Most pharmaceutical or biotechnology companies claim that it costs anywhere between $800 million to $900 million and a time span of 12 to 15 years to discover and market a new drug.

The process of drug discovery and development is a tedious one and the chances of success are 1:10,000. This means that of nearly 10,000 chemical entities that are synthesized and tested only 1 may make it to the end and actually be used in human beings.

How are new drugs discovered?

The following are the steps that are followed in the discovery and development of new drugs:

1. Target identification:

The process begins with chemists, scientists and pharmacologists understanding a particular disease area at a molecular level. They then search for chemical or biological substances that can act on these molecular interactions and produce the desired pharmacological effect in the body, thus curing the disease or reversing its progress. Chemists or molecular biologists will then synthesize a number of different drugs with variations in their molecular structures.

2. Lead identification:

Out of the thousands of chemical or biological entities that are synthesized in Step 1, one, or one group of, lead compound or substance is discovered that is believed to have the desired pharmacological effect in terms of curing the disease.

3. Lead optimization:

The various lead compounds discovered in Step 2 are compared in order to select the most promising candidate that has the greatest potential to be developed into a safe and effective treatment for the disease condition.

4. Pre-clinical Testing:

The lead compound or substance that is believed to be most effective and safe is then tested extensively in laboratory animals to make certain that it will be safe for use in human beings. It can take anywhere between one to five years to complete the evaluation of the compound at this stage. The various tests conducted during this phase will determine in what form the drug will be administered to human beings, oral tablets, intravenous injections, etc.,. Scientists and chemists will also ascertain the pharmaceutical composition of the drug, its safety and how it will be formulated and manufactured.

5. Clinical Testing:

In this stage of drug development, the drug is administered to healthy human volunteers, as well as patients that suffer from the disease, to determine the safety of the drug in human beings. Clinical testing is conducted in three phases viz., Phase I, II & III. In all three phases increasing numbers of human volunteers are tested.

Phase I - Clinical Studies:

These studies typically take six to nine months to complete and are designed to understand the safety and tolerability of the lead compound in humans. They involve administering the drug to a small number, between 50 and 100, of healthy volunteers for a short period of time. Scientists then note how the drug behaves in the body i.e. its absorption, distribution, metabolism and excretion.

Phase II - Clinical Studies:

This phase usually takes anywhere between six months to three years to complete depending on the type of drug and the disease condition it treats. During this phase, scientists determine the effectiveness of the drug and further evaluate its safety in humans. The drug is administered to several hundreds of human volunteers who are suffering from the disease that the drug will be used to treat. The results of this phase will determine whether the drug is effective in treating the disease condition, the minimum and maximum effective doses of the drug and the safety and tolerability of the drug in patients.

Phase III - Clinical Studies:

Depending on the type of drug and the disease condition, this phase usually requires one to four years to complete. During this phase several hundreds to thousands of patients will be tested. The study is designed to determine the safety and efficacy of the drug, at the desired dosages, in larger groups of patients.

6. Application for Marketing the New Drug:

The pharmaceutical companies that successfully complete all the stages of drug discovery and development, and have all the data gathered from these studies, are then required to approach the regulatory authorities of their respective countries to apply for permission to market the new drug. These applications are called NDAs (New Drug Applications) in the U.S. and MAAs (Marketing Authorization Applications) in the U.K. It may take anywhere between six months to two years to obtain approval to market a new drug.

7. Post Marketing Testing:

Once the pharmaceutical company receives an approval to market the new drug and after the new drug is marketed, there are more studies conducted in order to ensure that the drug has proven safety and efficacy in larger populations.

These studies involve many thousands of patients across the globe and may go on for several years. These studies may be designed to determine longer-term efficacy of the drug, or effectiveness in new indications where it can be used, or even cost comparisons with already available drugs to treat the same disease condition.

Does the End Justify the Means?

The journey of drug discovery and development is a long and arduous one, with many pitfalls along the way. Several promising ‘lead compounds’ may show a glimmer of hope in the initial stages, but may never end up in the market. Several hundreds of scientists and thousands of patients are involved in proving the usefulness of a single drug. So, is it fair to judge the price of a drug only in terms of recovering the millions of dollars it takes to discover and develop it? Or does the time and effort involved in the process have a value too?

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