"The High Cost of Developing Drugs"
Josh made the point that new food recipes, with relatively low development costs, were hardly typical of product innovation. Quasibill, in response, provided some new and (for me at least) mind-blowing information on just why the cost of developing new drugs is so high. I was aware that the FDA testing regime added considerably to the cost--not only its excessively stringent safety testing requirements, but its requirement since the 1960s of testing for efficacy. And I understood that such regulatory inflation of costs served as a market entry barrier, effectively cartelizing the drug industry between a handful of highly capitalized firms. What I didn't realize was just how much of the cost comes, not from testing specific drugs, but from gaming the patent system: i.e., testing a spectrum of related drugs in order to secure patent lockdown on alternative versions of the same drug, and thus forestall competition.
What generally gets included in the accounting for research costs are some amazing things, that I can't do justice to on a blog - I get surprised everytime I talk to my friends in the industry about how much waste is involved - but it's all invisible to them. It's just "how it needs to be for the FDA to keep track of everything." If you want, I can give you some examples, but I'd rather focus on another point for now -
Namely that what big pharma is researching is cancer meds. It's not. In the rare instances that big pharma produces and markets such medicines, it has purchased them from small start-ups that themselves are the result normally of a university laboratory's work. When big pharma cites to billions of research costs, what it is talking about is the process whereby they literally test millions of very closely related compounds to find out if they have a solid therapeutic window. This type of research is directly related to the patent system, as changing one functional group can get you around most patents, eventually. So you like to bulk up your catalogue and patent all closely related compounds, while choosing only the best among them, or, if you're second to market, one that hasn't yet been patented.
This work is incredibly data intensive, and requires many Ph.D's, assistants, and high powered computers and testing equipment to achieve. But it is hardly necessary in the absence of a patent regime. In the absence of patents, (and of course the FDA), you could just focus on finding a sufficient therapeutic window, and cut out the remaining tests. It would be an issue of marginal costs to determine whether someone would go to the effort to find a "better" therapeutic window, or related parameter.
So the "high cost of developing drugs" is really the high cost of maintaining a monopoly against potential competitors pursuing similar lines of research. Think of that the next time you see one of those smarmy, soft-lit Glaxo or Pfizer ads with the elevator music in the background, where some biochemist gets all teary about her Alzheimer's-afflicted grandma.