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Drug
Industry Exaggerates R&D Costs To Justify Prices, Consumer Group Says
By
Sarah Lueck
The Wall Street
Journal, July 24, 2001
While the drug-industry group Pharmaceutical Research and
Manufacturers of America, or PhRMA, has said research and development
costs total about $500 million for each new drug, the report by Public
Citizen puts the amount closer to $100 million. The consumer group said
that PhRMA's figure includes tax-deductible expenses and "unrealistic
scenarios of risk."
The report comes as Congress is attempting to create a
prescription-drug benefit within Medicare, the federal health-insurance
program for the elderly and disabled. The drug industry has long argued
that if the government steps in to control or lower drug prices, research
and development will suffer.
The $500 million figure, Public Citizen said, only
applies to development of products that had never before been tested on
humans and were not purchased mid-development from other companies. The
study noted that drug companies also profit from less-costly
reformulations and new dosage levels.
Taxpayer-funded research also cuts the cost and risk
associated with developing new remedies, the study said. An internal
National Institutes of Health document obtained by Public Citizen showed
that taxpayer-funded scientists conducted 55% of the studies that led to
the discovery and development of the top-five selling drugs in 1995.
PhRMA spokesman Jeff Trewhitt said the group stands
behind the $500 million estimate for the development of a new drug. And
that estimate, he added, "may even be conservative," based on
recent research. PhRMA is still looking over portions of the report,
including the issue of tax deductions, he said.
On the issue of federal funding, Mr. Trewhitt said the
NIH and its grants have funded basic, general research but not the type
that is applicable to developing a specific prescription drug.
"Applied research is predominately being done by companies" at a
great financial risk, he said.
At a news conference to publicize the Public Citizen
report, Democratic Reps. Pete Stark of California and Tom Allen of Maine
said Congress shouldn't be afraid of the drug industry's arguments about
research while deciding on how to structure a drug benefit. "They're
riding roughshod over the American people on this, and they're
winning," Mr. Stark said.
Mr. Trewhitt said the industry's arguments against government attempts to
lower drug prices should not be taken lightly. "Part of the reason we
are the most innovative pharmaceutical industry in the world is that
there's a competitive marketplace rather than price controls," he
said.
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