Comment Re:5+% of revenue on very long term return (Score 1) 552
The there is profit. The pharmaceutical firms are doing research, but then what happens when they try to pay for the research?
Not even big pharma anymore. Instead of basic research, big pharma works hand-in-hand with the venture folks.
The process is something like this:
- Researcher A at university B makes a potentially marketable discovery in his/her laboratory.
- University B patents the discovery and, in return, will receive a portion of any future licensing revenue (typically a 50-50 split with the researcher; this is all part of the researcher's contract).
- Researcher A, together with some ex-graduate students, forms a start-up with venture funding and does the initial animal studies (or sometimes just licenses the rights to someone else's start-up).
- If the initial research looks promising enough, then big pharma swoops in and buys the entire company, with profits all around.
- Big pharma does the human studies (expensive, but low-risk, since they already know it works in animals), gets FDA approval, markets and sells the drug to make massive profits.
The only research big pharma does anymore, then, is the human clinical studies needed to satisfy the FDA — basically it's product development disguised as research.
Also, if you look at their balance sheets, you'll discover that Pharma spends significantly more on marketing than R&D. Viagra is $10/pill has as much to do with paying for the TV ads as it does with recouping any research costs.
-JS