THE ECONOMICS OF RESEARCH-AND-DEVELOPMENT

Scientific and technological achievements form the basis of all value-generating processes. The cost of bringing a prescription drug to the market in the U.S. has increased from $ 500,000 - $ 21.8 million during the 1950s and '60s to $ 231 million between 1970 and 1986. Pharmaceutical companies have streamlined, internationalized, and entered into cooperative strategies to reduce redundancies in drug discovery and development. The proportion of drugs that provide new therapeutic possibilities has risen from 4 percent in the early '80s to almost 20 percent in 1989. Cost/benefit relationships show that many new medicines lower health care costs. Research-based pharmaceutical companies must recover their long-term, high-risk investments through adequate drug prices. Government funding for basic research has declined. Much of the financial support for basic research at universities and non-profit institutions is provided through industry. The indiscriminate regulation of drug prices jeopardizes the industry's ability to develop new drugs. It could also seriously threaten the support of basic research.