Why Are New Drugs Expensive and How Can They Stay Affordable?

Abstract

Increasing life expectancy leading to a higher median age causes an increasing need for healthcare resources, which is aggravated by an increasing prevalence of preventable diseases such as type 2 diabetes. This includes increasing expenditures for medicines, although these increases when expressed as a share of overall societal wealth are more moderate than often claimed. An increasing use of generic medicines (currently about 90% of all prescriptions) means that costs for discovery and development of innovative drugs must be recovered on a shrinking percentage of prescriptions. However, the key challenge to affordable drugs is exponentially increasing costs to bring a new medicine to the market, which in turn are largely driven by an about 90% attrition rate after start of clinical development. While many factors will be required in concert to keep innovative medicines affordable, reducing attrition appears to be the factor with the greatest potential to contain escalating drug development costs and thereby medication expenditures.