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Yet prices are sufficiently high that it is a surprisingly profitable industry. It is also worth bearing in mind that the government find a large share of drug

Yet prices are sufficiently high that it is a surprisingly profitable industry. It is also worth bearing in mind that the government find a large share of drug development. [1] [1] "pharmaceutical and biotechnology sales revenue increased from $534 billion to $775 billion between 2006 and 2015.... Drug industry spending for research and development increased from $82 billion in 2008 to $89 billion in 2014" (I assume there are other costs so one cannot simply divide to get gross profit but it seems illustrative) https://www.gao.gov/mobile/products/GAO-18-40 https://www.gao.gov/mobile/products/GAO-18-40

mirimir 8y ago
The pharmaceutical industry inflates costs of drug development. https://www.nytimes.com/2014/11/19/upshot/calculating-the-real-costs-of-developing-a-new-drug.html https://www.nytimes.com/2014/11/19/upshot/calculating-the-re...
- aaavl2821 8y ago
  The costs may be inflated but the actual costs are probably not that different than tufts. Several other studies suggest pharma is getting a return on its r&d investment of under 5% (a Deloitte and McKinsey study as well as a Novartis one). Pharma is also cutting internal r&d because they can't get a return. They buy drugs from startups instead which does not show up in the profit and loss statements In 2018 only like 12% of new FDA approved drugs were developed by big pharma. 63% were developed by small companies. A negligible amount / zero were developed by universities The $161M figure cited in that nytimes study is not at all representative because most early stage r&d is done outside of big pharma, and then big pharma buys the drugs and markets them If drug research was profitable pharma would be doing more of it, not less
aaavl2821 8y ago
Analyses like that are misleading because most of the industry's revenues and profits are concentrated with a few firms. The vast majority of biotech and pharma companies are not profitable and never aim to become profitable -- rather they just do r&d and then sell drugs to big pharma once some of the clinical risk is taken out In 2018 only like 12% of new FDA approved drugs were developed by big pharma. 63% were developed by small companies. A negligible amount were discovered by universities alone Pharma acquired these drugs from startups through M&A which doesn't show up in profit and loss statements. It shows up on the balance sheet That $84B r&d figure seems very low. The top 15 pharma companies spend something like $75B a year in r&d. VC backed startups spend like $10-15B. Then all the firms in between account for the majority of spending. Don't remember the source but I think total global pharma r&d is like $200B

mirimir 8y ago

The pharmaceutical industry inflates costs of drug development. https://www.nytimes.com/2014/11/19/upshot/calculating-the-real-costs-of-developing-a-new-drug.html https://www.nytimes.com/2014/11/19/upshot/calculating-the-re...

aaavl2821 8y ago
The costs may be inflated but the actual costs are probably not that different than tufts. Several other studies suggest pharma is getting a return on its r&d investment of under 5% (a Deloitte and McKinsey study as well as a Novartis one). Pharma is also cutting internal r&d because they can't get a return. They buy drugs from startups instead which does not show up in the profit and loss statements In 2018 only like 12% of new FDA approved drugs were developed by big pharma. 63% were developed by small companies. A negligible amount / zero were developed by universities The $161M figure cited in that nytimes study is not at all representative because most early stage r&d is done outside of big pharma, and then big pharma buys the drugs and markets them If drug research was profitable pharma would be doing more of it, not less

aaavl2821 8y ago

Analyses like that are misleading because most of the industry's revenues and profits are concentrated with a few firms. The vast majority of biotech and pharma companies are not profitable and never aim to become profitable -- rather they just do r&d and then sell drugs to big pharma once some of the clinical risk is taken out In 2018 only like 12% of new FDA approved drugs were developed by big pharma. 63% were developed by small companies. A negligible amount were discovered by universities alone Pharma acquired these drugs from startups through M&A which doesn't show up in profit and loss statements. It shows up on the balance sheet That $84B r&d figure seems very low. The top 15 pharma companies spend something like $75B a year in r&d. VC backed startups spend like $10-15B. Then all the firms in between account for the majority of spending. Don't remember the source but I think total global pharma r&d is like $200B