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May 25, 2022

12/17/2021 2:28:00 PM
It's not false advertising

Dear Editor;
Recently Kay Zieghan wrote that she believes that drug companies are making false claims about their drugs. I trust that Ms. Zieghan has extensive experience in pharmaceutical and medical device manufacturing to make such statements. If not, here are some of the concepts from someone who spent over 40 years in the pharmaceutical and medical device business in the U.S. and Canada. Yes, drug prices are controlled by the Canadian government, medication prices are lower in Canada is because of government price controls. 
Here's the concept. People often say, "Why can you charge $XX dollars for a pill that has 20 cents worth of chemicals?" A study by the Tufts Center for the Study of Drug Development published in the Journal of Health Economics in May 2019, gave an estimated cost of $2.6 BILLION for an average new drug. That includes approximate average out-of-pocket costs of $1.4 billion and time costs of $1.2 billion. The Tufts study evaluated the R&D costs of 106 RANDOMLY CHOSEN new drugs from a survey of 10 pharmaceutical companies. The average pre-tax cost of new drug and biologics development including the costs related to abandoned trials and development was $2.870 billion in 2013 dollars ($3.262 billion today). Add in the sponsored research at thousands of hospitals and clinics (paid for by drug company grants, NOT taxpayers). And then the big day!!
No wait. Only 5 in 5,000 drugs that enter preclinical testing progress to human testing. One of these 5 drugs that are tested in people is approved. The chance for a new drug to actually make it to market is thus only 1 in 5,000.
Now back to the basics of economics that I have to repeat frequently to so many. Basic Concepts 1) Companies, from the local bakery and bookstore to GM and Walmart, exist to make money for their owners and investors, 2) Companies control costs and set prices to make those profits, 3) The costs above are development only and do not allow for distribution costs, marketing, disposal of post shelf life products, etc., 4) If costs are too high or regulations (like price controls) make the profit insignificant said companies get out of the business, drop the products or move out of the U.S. taking away jobs, 5) Without protection (patents) that their costs will be recoverable for the next 17 years, the risk makes many products financially unattractive and they are not developed. It's the same for any product.
Conclusion: If you believe that ANY company (the local bakery, car manufacturer, restaurant, or medical service) is making a great deal of profit for very little cost and risk, you can simply start up a competitive company and take those profits home. You suggest it's easy. If you believe you can pay everyone $15/hr with full benefits and still sell burgers for $3.95, go for it. OR you can simply invest in these companies through stock purchases. Then they will use invested money to develop NEW products to hire MORE people and build BIGGER and BETTER factories' and make America better. And after 5 or 10 years you'll get some profits paid right into your pocket (about a 5% return). Oh, you might also lose everything you invest...
If it wasn't for the upside to do the research and develop new drugs and treatments, the 30-60 drugs developed per year wouldn't exist.
You complain about the costs?
What would life be without these life savers?

John Curran
Dodgeville, WI

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