Why are drug prices so high?
Drug development is the most high risk/high reward industry possible. It costs roughly 2 billion USD to take a drug from conception to market. The vast majority of drugs never make it to market. Each of those failures costs some fraction of 2 billion USD. Many of those failures are weeded out only at the end when all of that investment has already been made. For those failures, the company makes back 0 of it’s investment. It’s not like a phone that doesn’t sell as spectacularly well as hoped. It’s no product at all. You can’t even learn much from those failures. It’s years of people lives (sometimes 10 or more) and huge amounts of money that just evaporate. It’s crushing.
This is why the drugs that work have to be expensive. They have to pay the company back and more for all the failures. Interestingly, most companies making drugs aren’t huge. Most are quite small:
Here’s an anecdote that represents a typical trajectory of a drug in development. It’s an entirely true story but the numbers are best approximations:
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50. In Cold Blood by Truman Capote – Considered by many critics to be the original non-fiction novel, this 1966 book details the brutal 1959 murders a farmer, wife and two children in rural Kansas. Capote deftly takes the reader into the minds of the two parolees who committed the crimes and describes the effects of their actions on the local community.
49. The Teachings of Don Juan by Carlos Casteneda – First published as a work of anthropology, this mind-altering journey documents Casteneda’s apprenticeship with the Yaqui Indian Sorcerer Don Juan. It is almost impossible to not feel totally transformed about the true meanings of reality after reading this sometimes shocking story.
48. Animal Farm by George Orwell – This is a novella with a very large message. Although it was first published in 1945, Orwell’s allegorical tale about a group of pigs that take control of a farm and attempt to shape a new society still creates haunting comparisons to present day political struggles throughout the world.
47. The Metamorphosis by Franz Kafka – This 1915 novella is consistently cited as one of the seminal works of short fiction. Kafka deftly takes the reader inside the mind and life of a traveling salesman who awakens one day to find that he has been transformed into a horrible creature.
46. A Tale of Two Cities by Charles Dickens – It’s hard to pass up reading a book that has sold over 200 million copies since its 1859 release. A gripping tale that is set in London and Paris before and during the French Revolution defined by the often brutal historical events that caused the pheasant’s revolt against the aristocracy.
45. The Naked and the Dead by Norman Mailer – This was Mailer’s first published novel that has been in consistent demand since its 1948 release. A well-crafted story blending military action with deft character development.
44. Deliverance by James Dickey – After reading this novel, many people will probably never want to go canoeing in the Georgia wilderness. A disturbing look into brutality, survival and the psychological aftermaths of lives that have been traumatically altered forever.
43. The Prince of Tides by Pat Conroy – There are few living writers today who can match the mastery of the English language and prose that Conroy presents in this 1986 novel revolving around the traumatic events of a South Carolina family. There are numerous passages in this book that people will want to reread just to experience the sheer joy of words well-written.
42. Brave New World by Aldous Huxley – The futurist themes in this novel are still relevant today even though the book was published in 1932. Huxley sought to deliver a frightening vision of the future and did so with stunning clarity.