In the world of technology, tools can be fast, cheap or easy to use - but you only get to pick two of those three.

Everyone knows that, it is common across all product development, yet a surprising number of people think medicine is somehow exempt - they want new, better drugs fast, they want them to be safe, and they want them to cost $4.

We want to keep smart people developing, not milking old technology cows, so we have a patent on drugs that eventually expires. Then the drugs can be made by someone else. Since they did no research, and incur no clinical trial expenses, these generic companies will produce them much cheaper and the high-end market can move on to solving new problems.

There is just one concern - it now takes a lot longer and has a lot more bureaucracy to get a drug approved, and the patent window ticks the whole time.  In 1981, a typical drug underwent 30 clinical trials involving about 1,500 patients. But by the early 1990s that had ballooned to more than 60 clinical trials and 5,000 patients and today it is an average 14 year process costing $2 billion. 1 out of 5,000 drugs will make it to market.

A few short years later, generic companies get to make profits from it. That is leading to a real brain drain in biotech. Small companies are less likely to bother, large companies want to leave the U.S. Analysts at the Center for Medical Statistics, Informatics and Intelligent Systems (CeMSIIS) at MedUni calculated the potential savings from generic medications used in the treatment of common conditions such as hypertension, hyperlipidaemia and diabetes mellitus and found it could be around 18 percent, equating to tens of millions of Euros.

That is fine, assuming new drugs are not better. If they are better, it means we are creating class warfare, where poor people get the old, less effective version because it is cheap. In 2012, the analysis showed spending of Euro 231.3 million, Euro 77.8 million and Euro 91.9 million on anti-hypertensive, lipid-lowering and diabetes-treating medications respectively. Cheaper generic versions would have saved Euro 52.2 million (22.6%), Euro 15.9 million (20.5%) and Euro 4.1 million (4.5%) in costs. This amounts to a potential saving of an average of 18%. Well, why didn't they do it if the effectiveness was the same?

"This study showed that substituting high-cost medications for common conditions such as hypertension, hyperlipidaemia and diabetes mellitus with the cheapest medications available on the market with the identical active ingredient and equally good effect can help Austrian health insurance companies to save up to Euro 72 million a year," explains Georg Heinze from the Center for Medical Statistics, Informatics and Intelligent Systems (CeMSIIS) at MedUni Vienna. 

Because of cost, some advocates want to make the patent window shorter or, in the United States, give the federal government the power to dictate the price it pays for drugs. When that happens, medical research will stop. Cheap drugs are only possible in foreign countries and as generic versions because early adopters pay a lot - they made it worthwhile for companies to spend the money on the best scientists who still are going to reach a dead end 999 out of 1,000 times. And only 1 in 5 of those successes will get to market.

By only thinking about cost, we discourage companies from doing small molecule research and they will just focus on slightly reworked versions of existing drugs. Helping people will no longer pay.

Citation: Georg Heinze, Milan Hronsky, Berthold Reichardt, Christoph Baumgärtel, Marcus Müllner, Anna Bucsics, Wolfgang C. Winkelmayer, Potential Savings in Prescription Drug Costs for Hypertension, Hyperlipidemia and Diabetes Mellitus by Equivalent Drug Substitution in Austria: A Nationwide Cohort Study, Applied Health Economics and Health Policy DOI 10.1007/s40258-014-0143-4