Yes, cancer drugs are expensive. Yes, they\’re so expensive that some people who would benefit from them don\’t get them. But that\’s not an excuse for people to misunderstand the actual costs of drug development.
Daniel Vasella, former chairman and chief executive of Novartis, the manufacturer, said the original price charged for Glivec in 2001 was considered \”high but worthwhile\” and was estimated to yield annual revenues of $900 million, enough to cover its development cost in two years. A decade later its annual revenues in 2012 were $4.7 billion.
The cancer specialists say the revenue earned by Glivec over the last 10 years \”represents generous profits to the company\”.
It\’s absolutely true that this particular drug has made vast profits. But that\’s not actually the way that drugs are, or even should be, priced.
For the drug companies also need to cover all of the costs of all of the research that failed to produce a drug that was usable. And these costs have to be covered whatever system we use to try and discover drugs. If it was entirely nationalised, government paid for everything, we would still have the costs of research that leads up blind alleys. The costs of dropping a drug when Stage III trials show that it kills more than it saves (that\’s a $500 million or so cost right there generally).
The drugs that do well have to pay for the development of the entire portfolio of drugs, not just for their own development.
To make an analogy to something currently fashionable: the arts. The hit shows, the hit movies, they have to be the revenue for the entire arts ecosystem, to cover all those terribly exciting duds that continually happen. The innumerable La Bohemes for the masses are what subsidise the occasional performance of The Green Knight.
Perhaps pharmaceuticals would be better produced by some other system: it\’s certainly worth the conversation. But that won\’t change this basic fact: the hits do not have to pay for themselves only, the hits have to pay for everything.