Field of Science

Drug costs and prices: Here we go again

Gilead's hepatitis C drug sofosbuvir (Sovaldi)





The most important context we need to understand again is one that is often neglected: a comparison of the price with the high cost of drug discovery and development rather than manufacturingwhich is always going to be low. The bare fact of the matter is that it takes about $5 billion to develop a new drug and this has little to do with profit margins. As a hypothetical example, even if the profit margin on Sovaldi was 0% it would still cost about $50,000 dollars and you would still hear a lot of criticism. The cost of a drug is not $5 billion because there's much profit to be made - as I indicated above pharmaceutical profit margins are about 20% - but because drug discovery is so hard. One can quibble about the exact number but that would only serve to obscure the real challenges. I have written four posts on the complexities of drug discovery science and I intend to write more. The reality is that Sovaldi would not have been invented in the first place had companies like Gilead not put enough money from profits into the R&D that went into its development. And sure, some pharmaceutical CEO's make obscene bonuses and and we need to have important conversations about that, but even that part does not significantly contribute to the high costs.





  1. its extortion , not profit
    they could make billions and much more profit should they reduce price at least half, but no!!
    they want to extort , killers

  2. Drug companies charge as much as they can for their products. Which means as much as the customer is willing to pay. In Europe, there isn't a free market. Priced are usually works out on the basis of cost effectiveness. In the US, prices tend to be steeper.

  3. I really want to see real numbers for the cost and profit for at least one drug instead of saying "drug discovery costs billions." Sure it takes a long time and huge amount of money. But, given the fact that we only hear "drug discovery costs billions and it takes ~10 years..." no one will believe that it really costs that much unless we see some numbers.

    1. Estimates vary. Forbes reckons it's not at $5 billion per drug - although that is on the high side of estimates.

      What you've got to take into account is not only the drugs that get marketed, but all the ones that were developed but then failed at some point in the trialling and testing process. Also, some drugs get regulatory short-cuts (if they're for diseases that only affect a small number of people), which makes them cheaper to develop.

      What is certain is that the cost to develop drugs is going up, and the sales of new drugs are going down (because there are so many good drugs out there already). So when you get something like Sovaldi, it's only ever going to be prescribed to a small percentage of all the Hep C patients out there, and each one only gets it for 12 weeks (because it cures them).

      So that means the price per course has to be high.

    2. now at $5 billion. Not 'not at $5 billion'...

    3. Thank you very much for the explanation.

  4. Well,
    the main problem with Sofosbuvir is that Gilead didn't researched it. It only partially developed it and with such a good drug, so better than the next standard of care, the clinical trials were not that costly. Sofosbuvir was in the pipeline of Pharmasset a small Biotech that Giled acquired for 11 billion. And here is the reason why they have to price it so high. During this year and next, the immediate competitors like Merck and Abbvie will launch their similar molecules for HepC and, although the early results show that the new molecules will not be as good as Sofosbuvir, they will be good enough to steal some of the market share of Sovaldi. Therefore, Gilead wants to squeeze the maximum amount of money from the market before that, so that the 12 billion investiment gets some return.
    This being said, Sofosbuvir is one hell of a drug and a great advancement for medicine. Bernard Munos put it quite accuratelly by saying that it belongs to a new class of drugs " Cost-effective but unaffordable". There are about 130 million people with HepC, if Gilead cures half of them, we are talking of 5460000000000 dolares. This also stands Sovaldi apart from other expensive drugs that are for a very limited group of patients (like cancer drugs or rare diseases). However, I can understand how americans are feeling bad about all this when Sovaldi will be less expensive in Europe and it will only cost 2000dolares in Egipt, with India and China probably following these type of prices due to more permissive and agressive laws on patent rights.


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