Do drug prices reflect development time and government investment?

Salomeh Keyhani, Marie Diener-West, Neil Powe

Research output: Contribution to journalReview articlepeer-review

14 Scopus citations


Background: Lengthy development times are cited by the pharmaceutical industry as one reason for high drug prices. Objective: We compared the prices of different groups of drugs after accounting for development time, government support, market size, and other drug characteristics. Design: We conducted a retrospective study of 180 human therapeutic drugs categorized into 8 drug groups by assembling data on drug development times, government support, drug characteristics, and prices. Measures: First, we compared the development time and level of government support across the 8 drug groups. Second, we assessed the independent effect of drug group on median price per day in a multivariable analysis, controlling for development time and all other variables. Results: Thirty percent of antiretroviral drugs had government patents compared with 16% of other infectious disease drugs, 6% of cancer drugs, and less than 6% of any other drug group (P < 0.002). Fifty percent of antiretrovirals had NIH trials listed in the new drug application for approval by the Food and Drug Administration compared with less than 6% of any other drug group (P < 0.001). More antiretroviral and cancer drugs received fast track status and accelerated review during regulatory review by the Food and Drug Administration (P < 0.001). The median price of antiretrovirals was $8 per day more, cancer drugs $11 per day more, than the reference group after adjustment for other variables (P < 0.001). Development time was not associated with drug price. Conclusions: Antiretroviral and cancer drugs, even after accounting for development time, are among the most highly priced medications. Notably, drugs with rapid development and more government support did not have lower drug prices.

Original languageEnglish (US)
Pages (from-to)753-762
Number of pages10
JournalMedical care
Issue number8
StatePublished - Aug 1 2005


  • Drug development costs
  • Drug prices
  • Pharmaceutical policy
  • Technology assessment

ASJC Scopus subject areas

  • Public Health, Environmental and Occupational Health


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