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Pharmaceutical Industry R&D Costs:

Source: www.cptech.org
Topic: Pharmaceutical Industry

Sort Desciption: Issue: The Public Citizen paper refers to the pharmaceutical industry as ... Findings: The pharmaceutical industry leads all industries in the tax it pays ...

Content Inside: Pharmaceutical Industry R&D Costs: Key Findings about the Public Citizen Report by August 8, 2001 1 S UMMARY OF K EY F INDINGS Many of the arguments made by the Public Citizen report do not stand up to close scrutiny. In several key aspects, the Public CitizTc(pN approach deviates fromot sndard methodolog) outla(by)23.s(l)-9.5per NCE. ( )]TT/7T4 1 T-f19.l Publi9-3.8( )-10(Citiz5-32n)1 g14(g1)5(iz5-32stnts )-1thaz5-32t(l-)(8( )-10(th9-32 DiMah5-32si R&)9)3(D eh5-32s)0timaz5-32teh5-32s maz5-32(by1)5( li9-3.ontaz5-32i(l-)(n maz5-32r)4)5(k)1iz5-32tin4(g1)5( ( )]T00 -1.15 T*-0.0005 Tc000805 Twcostcts0(thmethodolog))29.(by)29.5as descr(bed 0(by)29.50(thauthor(t os o noi8cludthan(by)29.5marketin4()29.5costc. ( )]TT/7T4 1 T-3.l)-)15 TD0.2005 Tc0 Tw!"( )TT/TT4 1 Tf19.015 T-0.0706 Tc049301 TwNe)4w Chemicseahel EntiCio(e)9.s8(s3N thcost 0(8R&)7c5(D. ( )]TT/7T4 1 T-f6-74.l)- 2 B ACKGROUND In July 2001, Public Citizen released a controversial new report, Rx R&D Myths: The Case Against The Drug Industry’s R&D ‘Scare Card’, arguing that the pharmaceutical industry is exaggerating the risk and cost of its R&D activities. Ernst & Young LLP was hired by Pharmaceutical Research and Manufacturers of America (PhRMA) to evaluate the Public Citizen report in light of research done by Dr. Joseph A. DiMasi of Tufts University, by the Congressional Office of Technology Assessment (OTA), and by the National Institutes of Health (NIH). This study outlines some of our key findings. C OST OF C APITAL Issue: Unlike other studies of pharmaceutical R&D costs (including the DiMasi and OTA studies), the Public Citizen study did not include the opportunity cost of capital in its estimates. Excluding this cost significantly lowers the Public Citizen estimates of R&D costs. Findings: The exclusion of the opportunity cost of capital is a shortcoming of the Public Citizen report, as it is common financial practice to account f ...

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