[Ip-health] Looking back at the rollout of the $802 Million DiMasi estimate, in 2001

Jamie Love james.love at keionline.org
Fri Nov 28 12:02:23 PST 2014

Many here remember the earlier $802 million estimate for drug development
costs, by DiMasi, Grabowski and Hansen.  The study itself was published in
2003 in the Journal of Health Economics.  According to the Journal, the
manuscript was "Received 17 January 2002; received in revised form 24 May
2002; accepted 28 October 2002."  What many may not recall is that the
results of the Study were announced November 30, 2001, at a press
conference organized by Merck, in a Philadelphia Hotel, miles from Tufts.
Speaking at the press conference was  Raymond V. Gilmartin, then the CEO of
Merck, and since May 2001, a board member of Microsoft.

I mention this because the results of the new study are also being
announced well in advance of the availability of the study, a practice that
seems quite unusual, and designed to shield the estimate from scrutiny on
the details of the data use to justify the estimate, and also making it
harder to evaluate the relevance of the study to real world controversies.

Why was the study announced on November 30, 2001?  For one thing, the WHO
had just adopted the Doha Declaration on TRIPS and Public Health, and
people were loudly questioning the benefits of strong patent protection.

Here are some quotes from the NYT and WSJ reports of the 2001 Philadelphia
press conference.



Robert Pear, Research Cost For New Drugs Said to Soar, New York Times,
December 1, 2001.  http://www.nytimes.com/2001/12/01/business/01DRUG.html

The Tufts study included the costs of developing and testing drugs that
never reached the market. The number of such drugs far exceeds the number
approved for sale. Dr. DiMasi said the study also included some of the cost
of capital — what could have been earned if investors had put their money
in securities of equal risk, rather than in pharmaceutical research and

Dr. DiMasi, an economist, said he had not audited the data provided to him
by drug companies. But he said he thought the companies were being "quite
straightforward and honest." Moreover, he said, the information on specific
drugs was consistent with aggregate data published by the industry's trade

Data for the study were obtained from 10 drug companies, and the Tufts
center receives financial support from drug companies, among others. But in
issuing the study, the Tufts center said it was "widely respected as an
independent source of information on drug development." Dr. DiMasi said
there were "no strings attached" to the money it received from drug

Gardiner Harris.  Cost of Developing New Medicine Swelled To $802 Million,
Research Study Reports, WJS. revised December 3, 2001.

Merck & Co. Chairman and Chief Executive Raymond V. Gilmartin attended the
unveiling of the Tufts data at a Philadelphia hotel and said increased
clinical costs stem from demands by managed-care buyers that drug companies
prove the value of their drugs in larger and longer trials.

As for the politics surrounding the DiMasi study, Mr. Gilmartin said the
DiMasi study sheds no light on drug prices. "The price of medicines is not
determined by their research costs," Mr. Gilmartin said. "Instead, it is
determined by their value in preventing and treating disease."

Mr. Gilmartin also argued that, given the enormous cost of research, big
pharmaceuticals companies, not small biotechnology firms, are essential for
developing medicines. He also said that patent-protection laws, which have
come under attack by some drug-company critics, are vital to encouraging
and protecting such huge investments.

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