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Archive for Saturday, January 26, 2002

Drug development drives prescription costs

January 26, 2002

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An old drug for psychosis called Haldol might cost a patient a half cent a pill. A newer anti-psychotic drug could run $3 a dose. Why do new drugs cost so much more?

Anybody who's ever popped a blood vessel over prescription drug prices deserves an explanation. Here's one from the Higuchi Biosciences Center and the Drug Information Center at Kansas University.

Of every 5,000 potential medications that drug companies test, only one is ever used by a patient. It typically takes 12 to 15 years to develop and costs about $500 million. On average, only three in 10 drugs generate a profit or break even.

Of the $35 for the average prescription, about $25 winds up in the drug company's hands. Almost $22 of that pays for research, manufacturing, sales and marketing costs.

The drug company's final profit margin is about 15 percent. Your drugstore or other retailer makes a profit of about 3.6 percent. The wholesaler makes less than 1 percent. Drugs are expensive there's no doubt about that. But the cost of not treating disease is higher.

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