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A glimpse at the price of drugs: Why they cost what they cost

We've written about drug development before on Scope, but here's another really interesting look at drug prices from Jessica Wapner, author of the PLoS blog Work in Progress:

...the calculations behind the price are complicated. They factor in how many people will buy a drug, how many of those people are likely to be privately insured, how many are likely to have Medicare or Medicaid, how many will have no insurance at all, for how long will a given patient be on the drug (on average), how much it costs to make the drug (yes, this does matter), and even what’s at stake (is the drug treating a life-or-death condition, or is it treating something more mild?).

Also important is the number of years that a drug will have market exclusivity and whether exclusivity can be extended through any of a number of legal loopholes. Even patient assistance factors in. Everyone has heard the gently spoken words at the end of a prescription drug commercial: “If you can’t afford your medication, drug company X may be able to help.” These “patient assistance programs” are vital for assuring that people without insurance do not go without needed medications. But they are also part of the pricing strategy (a topic for a very juicy future post). There are companies that specialize in such forecasting, helping drug makers to decide on a price.

Previously: Why drug development is time consuming and expensive (hint: it's hard)
Photo by ciccioetneo

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