Why Drugs Cost So Much

Medical Author: Omudhome Ogbru, Pharm.D.
Medical Editor: Jay Marks, M.D.

Anyone who has purchased prescription medications has probably wondered why they cost so much. The media has reported on the issue of drug costs a few times with the slant usually being that drug companies are greedy, selfish, and uncaring. Therefore, it is not surprising that the public also shares this view. In their defense, the drug companies usually point to the cost of research. The media then responds with figures showing that the companies spend more on marketing than they do on research. Is the issue really as simple as greed versus the cost of research? The answer is more complicated. To shed some light onto this issue, we need to examine the process of drug development and the economics of manufacturing and selling drugs.

The first step in the development of drugs is the discovery of a new compound (natural or synthetic) that affects a medical condition. The first phase of development involves research into the biological and chemical properties of this compound to determine its effects--how it is absorbed, distributed, and eliminated in the body--as well as its safety. These early studies occur in the laboratory using cells on plates (tissue cultures) and animals. If the new compound is safe and effective in animals, the next phase is testing in a small number of healthy human volunteers to confirm the information from the animal studies and to gain further information on the effects of the compound. Finally, the new compound is tested in humans who have the condition for which it will be used. Once the compound is proven to be safe and effective for the condition, the company applies to the Food and Drug Administration (FDA) for a license to manufacture and sell this drug. The FDA tightly regulates the testing of new compounds in humans and has strict criteria for the approval of drugs.