Why new drugs are so expensive–AstroZeneca fostamatinib

AstraZeneca has purchased the rights to a new arthritis drug (fostamatinib). If you are wondering why drugs are so costly consider this.

AstraZeneca on Tuesday said it’s reached a pact to pay Rigel Pharmaceuticals up to $1.25 billion before royalties (medicynical emphasis) to license a drug used to treat rheumatoid arthritis.

AstraZeneca, in buying the drug, is paying for the previous research and future profits. Consumers will get to pay for both these companies revenue.

This is not a unique practice in the drug manufacturing industry.

“We believe that the terms Rigel secured compare very favorably to the other two compounds that are now in the hands of U.S. large pharma companies, with higher economics in terms of both up-front and future milestones,” he said in a note to clients.

Is it any wonder that drugs are so costly. Is this the market providing impetus for efficiency and competition or is it monopolistic practices manipulating the market to assure high prices and profits?

Medicynical Note: (added 2/18) My objection to this type maneuvering is the doubling of the profit requirements. Astrazeneca pays, the developing company, for the right to own and market the drug and also for future profits. Meanwhile AstraZeneca has its own profit needs that have to be fulfilled. In a single stroke the company is obligated to earn double profits on an already expensive drug–guess who pays.

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