Episode 4: The Price of Discovery
Why Do Medicines Cost So Much? — Part 1
If you’ve ever stood at a pharmacy counter and wondered how a tiny bottle of pills could possibly cost so much, you’re not alone.
In this episode of Sick by Design, we begin exploring one of the biggest questions in American health care: why does health care cost so much?
We start with prescription drugs and follow the journey of a medicine from scientific discovery to the pharmacy counter. Along the way, we look at the remarkable story of Gleevec (imatinib), a breakthrough treatment for chronic myeloid leukemia that transformed a once-devastating cancer into a manageable disease for many patients.
But scientific breakthroughs don't happen in a vacuum. Developing a new medicine can require years of basic research, clinical trials, enormous financial investment, and many failed attempts before a successful treatment reaches a patient.
So who pays for that research? How much does drug development really cost? And how much of that work is publicly funded versus privately funded?
We also examine the relationship between publicly funded scientific research and private pharmaceutical development, and the role that patents and market exclusivity play in determining when competitors can enter the market.
Gleevec offers a fascinating case study. Novartis and Sun Pharma settled patent litigation in 2014, allowing Sun's generic imatinib to enter the U.S. market on February 1, 2016, approximately seven months after Gleevec's basic compound patent expired. The terms of the settlement were confidential, and the agreement has been characterized differently by critics and by Novartis.
Once generic competition expanded, the price of imatinib fell dramatically compared with brand-name Gleevec.
That illustrates an important point we'll return to throughout this series:
The price of a medicine isn't simply a reflection of what it costs to invent or manufacture it.
Patents, market exclusivity, competition, insurance design, negotiations, and the structure of the pharmaceutical supply chain all influence what different people and organizations ultimately pay.
And that brings us back to the larger question at the heart of this series: how did we build a health care system in which scientific discovery, intellectual property, investment, insurance, and patient access became so tightly intertwined?
This is only the beginning. In future episodes, we'll follow the different tributaries that feed into the cost of American health care—including patents, pharmaceutical pricing, pharmacy benefit managers, insurance, hospitals, and the complicated incentives connecting all of them.
Because if we want to change the system, we first have to understand how we built it.
Druker, B. J., et al. (2001). “Efficacy and Safety of a Specific Inhibitor of the BCR-ABL Tyrosine Kinase in Chronic Myeloid Leukemia.” New England Journal of Medicine, 344(14), 1031–1037.
DiMasi, J. A., Grabowski, H. G., & Hansen, R. W. (2016). “Innovation in the Pharmaceutical Industry: New Estimates of R&D Costs.” Journal of Health Economics, 47, 20–33.
Cleary, E. G., et al. (2018). “Contribution of NIH Funding to New Drug Approvals 2010–2016.” Proceedings of the National Academy of Sciences, 115(10), 2329–2334.
Wong, C. H., Siah, K. W., & Lo, A. W. (2019). “Estimation of Clinical Trial Success Rates and Related Parameters.” Biostatistics, 20(2), 273–286.
National Academies of Sciences, Engineering, and Medicine. (2018). Making Medicines Affordable: A National Imperative.
U.S. House Committee on Oversight and Reform (2020). Unsustainable Drug Prices: Testimony from the CEOs (Part II).
Novartis (2014). “Novartis Settles Patent Litigation on Gleevec with Sun Pharma Subsidiary.”
