The Real Reason Why Drugs Cost So Much

Anyone who has ever purchased prescription medications has certainly wondered at some point why they actually cost so much. The media believes that the reason why prices are so high is because the pharmaceutical industry is selfish, greedy, as well as uncaring. Therefore, it is not surprising at all that the public came to this conclusion as well. However, in their defense, companies from this industry usually point to the cost of research.


Pharmaceutical companies say that the discovery of a new compound for different drugs involves high costs. The development process is a very long one, and it involves, in the beginning, a deep research into the biological as well as chemical properties of the new compound in order to determine its effects. These effects involve how the compound is being absorbed, distributed, eliminated in the body, and how safe it actually is. The studies occur in professional laboratories using cells on plates and animals. In case the compound is safe and gives positive results in animals, the next phase is to test the product on several healthy human volunteers for another confirmation. Then, the new compound will be tested in individuals who deal with the health problem for which it will be used. Once it is safe and effective for that certain condition, the pharmaceutical company applies to the FDA for a license in order to be able to manufacture and see the drug.

As mentioned earlier in our article, the entire process is a long and expensive one, and that’s the main reason why most drugs, especially the new ones, that are available on the market these days, cost so much. Pharmaceutical companies are similar to other companies in that they manufacture products that need to be sold later for a profit so that the company can survive and grow. The drug business is somehow risky. For example, just one out of every ten thousand discovered compounds actually becomes a safe & approved drug for sale. Just imagine how would it be for a company like that to invest a huge amount of money to make a drug and not get the license. This would certainly be a fiasco, which can have an extremely negative impact on the business.


Creating a brand new drug can take up to 10 years, and its development involves lots of work and an average cost of 500-million dollars. This amount of money is being spent before the FDA approves the drug, and in case the company will not get the license, then all the investment will be lost. All these expenses need to be covered by the revenue from compounds that become approved drugs. In case the pharmaceutical company loses the money, in order to survive needs to discover a ”blockbuster” every few years. However, looking at the positive side, once the drug is safe to be manufactured and sold, millions of dollars will be spent on marketing. Therefore, in addition to maximizing returns on their investment, most companies of this type sell their products at a quite high price.


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