R & D costs of big pharma companies are inflated. The one billion dollar figure as the cost of drug discovery started floating ever since The Tufts Centre for the Study of Drug Development, Boston study in 2000. The study took inflated figures of patients per drug trial. It added cost of capital to the drug discovery cost where capital cost is defined as the money the company would have made, had it invested in the stock market instead of R & D. It assumed a hypothetical return of 11 per cent compounded over 7-5 years ( the period to complete clinical trials and get the approval from the FDA ). It should have considered a realistic return of  3-7 per cent. The trial and approval period could have been reduced to 4 years. The tax subsidy enjoyed by the companies on R & D  expenditure is not included in the cost. The marketing spends which include freebies to doctors and sponsorships for conferences are much higher. Besides a few drugs are really innovative, some are modified versions and most are me-too products. The industry claims high costs for each and every drug brought into the market. Even if we assume the inflated figure of one billion dollar for drug discovery, companies earn many times that amount in a year. There is an average 19% profitability, almost on par with oil industry’s profitability.