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Pharmaceuticals spent more than earned on drugs in five recent years, MIT study finds

For the pharmaceutical industry, it might not come as a surprise that discovering and testing a new drug is a lot more expensive than it used to be.

But according to a new study, the expenses for one recent period actually outweighed the costs.

Ernst Berndt, a professor at the MIT Sloan School of Management, co-authored a study that found the costs of making and selling new drugs from 2005 through 2009 outstripped the revenue drug companies made from them by an average of $26 million each.

It’s not the first study to look at the cost of developing prescription drugs, many of which have suggested costs have risen in recent decades, but it is one of few to compare costs to revenue. Using data on more than 400 drugs sold between 1991 through 2012, Berndt and his fellow researchers found that drugs launched between 1991 and 2004 made billions in profits. Drugs launched over the next five years lost money, the researchers said.

The study was partly funded by a group of pharmaceutical companies. Berndt’s contributions were not, according to a note in the February 2015 issue of the journal Health Affairs, where the article appeared.


Those numbers might be changing. Robert Coughlin, the president of the Massachusetts Biotechnology Council, a trade group, said companies discover and test drugs differently than they used to, with an “ecosystem” of big and small companies conducting research, conducting tests, and making and marketing drugs according to their strengths.

“There’s no miracle solution, but what we are seeing is a clear shift in strategies within companies to address this fact,” said Kenneth Kaitin, the director of the Center for the Study of Drug Development at Tufts University whose own research has shown similarly high costs for drug development. “The science is driving a lot of this [change], hand-in-hand with the economics.”


Jack Newsham can be reached at jack.newsham@globe.com. Follow him on Twitter @TheNewsHam.