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This little pill goes to market, but does it cost $76 million or $1.3 billion? Is Big Pharma exaggerating the cost of creating drugs?

Pharmacy area of Wal-Mart store in Mount Prospect, Illinois
Pharmacy area of Wal-Mart store in Mount Prospect, Illinois
Tim Boyle/Getty Images

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The Pharmaceutical Research and Manufacturers of America (PhRMA), or Big Pharma, claims it cost as much at $1.3 billion to create and bring a new drug to market. The dollar estimation is important because the cost of R&D can be used to justify tax breaks, faster drug approvals, protection against generics and the availability of less expensive drugs from Canada. The logic goes something like this: If R&D costs are high, profit margins must be too or the industry can’t sustain. But the problem (say some critics) is that the numbers get a bit squishy and are not always easy to verify. A new study reveals that the cost of bringing a pill to market isn’t $1.3 billion, but is actually closer to $76 million. So if that’s true, will my bottle of pills cost a little less at the drug store?


Michael Hiltzik, Pulitzer Prize-winning business columnist for the Los Angeles Times and author of Colossus: Hoover Dam and the Making of the American Century

Donald W. Light, professor of comparative health policy at the University of Medicine and Dentistry of New Jersey; visiting researcher at Princeton University