Originally Posted by jayeff

Largely an urban myth happily promoted by the drug and medical research companies themselves.

According to the National Institute of General Medical Sciences, untargeted bio-medical research (ie play around and see what you find), returns $10-$16 for ever dollar spent. Of course, those aren't nearly sexy enough figures for the big pharmaceutical companies, so up to a point, they do take bigger risks in return for the promise of bigger rewards.

About 20% of prescription costs goes on R&D, but that isn't quite the whole story. A large part of that money is spent, not on research to combat problems which do not already have a solution, but on finding ways to create drugs sufficiently different from successful drugs to be marketable alongside them. To put matters further into perspective, while the US government spent about $10 billion during the first decade it seriously tried to combat AIDS, the entire drug industry spent less than $3 billion on research. The market for AIDS drugs, despite their limited value, is now worth $17 billion a year.