As with human drugs, it is expensive to research and develop an animal drug. Bringing an animal health product to market is a complex process. Only one in 20,000 discovered chemicals ever makes it from the laboratory to the farm. And only one in 200 potential drugs makes it through pre-clinical testing and approval. 1 Relative to the size of the markets, drug manufacturers appear to spend approximately as much on research and development of animal drugs as they do on research and development of human drugs .
Research is a fixed or sunk cost.
Manufacturers do not set their prices based on recovery of these costs. Instead, they set their prices as high as possible in order to maximize revenue and profit. In the case of the drugs investigated in the congressional study comparing the prices of human and animal drugs, most of the drugs have been on the market for over ten years. Lanoxin, the drug with the highest price differential among the 200 most popular drugs, has been on the market since 1952. For these drugs, the manufacturers have already had more than enough time to recoup their research and development costs.