April 4,2023

High drug prices have been a controversial issue for years, contributing to the bad reputation that “big pharma” gets, despite the industry’s demonstrated commitment to positively impacting the lives of people living with the disease.

What many people don’t fully understand is how hard R&D—research and development—really is. It can take 10 to 15 years to go from lab bench to medicine cabinet. Even then, only a small fraction (1 in 5,000) of drugs actually makes it to market.(1) To add to this, the number of new drugs approved for every billion US dollars spent on R&D has halved every nine years since 1950.(2) That is, for every 256 drugs approved in 1950, only 1 drug is approved today.

The innovation process in pharmaceuticals shares some similarities with another industry often ridiculed for seemingly exorbitant prices—designer fashion. Designers invest incredible amounts of time and money into creating unique styles. To remain in business, high prices (and profit margins) are a necessity.

Developing Vaccines vs. Designing Collections

The late Alber Elbaz (former Creative Director at French luxury fashion house Lanvin) explained: “I took all the bones out, and I stitch, and to get there, you know, it took me forever. It took me six or seven dresses to make one… It is so much work. Doing a collection for me is almost like creating a vaccine. Once you create the one vaccine, then you can duplicate for nine dollars and ninety-nine cents. But see if you can create it for nine dollars and ninety-nine cents, and the answer is no.”(3)

When you purchase a designer sweater, you’re not paying for $2,000 worth of wool. Instead, you’re paying for the time and effort that went into making the many failed versions required to land on the perfect one you now see on the cover of Vogue.

Copycat Effect: Inverse Impacts on Industry

The biggest difference between these two industries is, of course, that pharmaceutical companies produce lifesaving essentials, not luxury items. However, instead of pushing prices down as some may hope, this leads to a different effect.

Fashion designers innovate, only to have their most successful pieces replicated by fast fashion companies like Shein or Zara within months. These companies can sell high-end designs at a far lower price as they avoid most of the upfront costs required to develop the product in the first place.

In the pharmaceutical industry, this copycat effect would make it impossible to justify the time and costs needed to bring a new lifesaving drug to market. Instead, pharmaceutical innovation is incentivized through patents, which delay “fast fashion equivalents” from producing generic alternatives, effectively allowing the original creators to sell at higher prices and recuperate the expenses invested.

The little-known industry secret: Because bringing each drug to shelves is so resource-intensive, pharmaceutical companies also invest remarkably in deeply understanding the patient experience of living with a disease or condition so that they can ensure they’re having the biggest impact on patients and improving the lives of them and their loved ones. Strategies are rooted in patient-centricity and often, helping patients gain access to their medications is a key imperative in the brand plan.

At Throughline Strategy, this is at the core of our work. We help our clients craft strategies and solutions that make meaningful contributions to patients’ health outcomes. R&D is hard—we strive to ensure that the 1 in 5,000 drugs that makes it has the most significant impact on patient lives.

(1) MedicineNet. (1999). Drug approvals - from invention to market...12 years! MedicineNet. Retrieved April 3, 2023, from https://www.medicinenet.com/script/main/art.asp?articlekey=9877 

(2) Scannell, J., Blanckley, A., Boldon, H. et al. Diagnosing the decline in pharmaceutical R&D efficiency. Nat Rev Drug Discov 11, 191–200 (2012). https://doi.org/10.1038/nrd3681

 (3) Levy, A. (2009). Ladies' man. The New Yorker. Retrieved April 3, 2023, from https://www.newyorker.com/magazine/2009/03/16/ladies-man