Why medication costs so much?
This study asked the question of how the cost of research and development of cancer drugs compared with the selling price. Their findings are sadly representative of all drugs approved by the Food and Drug Administration; not just cancer drugs. In 2017 it was found $14.50 (range $3.30-55.10) for every dollar of research and development costs. High costs of research and development have long been touted as the justification of the skyrocketing drug prices.
The industry has claimed that 20% of its revenues are reinvested into research and development. In reality, previous studies have found some cancer drugs were more than sufficient to cover past research and development expenses from originator companies. This study looked at all drugs approved by the FDA between 1989-2017 for any cancer-related indications. In 2017 median sales across all drugs was $435.2 million with a range from $1.8 million to $8.2 billion.
Forty-nine cancer drugs accumulated sales of more than $5 billion. By the end of 2017 five drugs had accrued sales of more than $50 billion for the originator companies. The outcome of this study highlights the falseness of the claims by the originator companies that they need to recoup their spent money on development. They found the incomes from sales of cancer drugs greatly exceeded the reported research and development costs. If this was just cancer drugs what about other medications that are no less in demand (Tay-Teo et al, 2019)?