<They also said the $800 million figure came from one industry funded study which has never been challenged.

"Never been challenged" isn't the same as proving something false, but we'll let that slide.

Whether the $800 million is correct or not, I have seen figures from other sources which put the costs in the hundreds of millions at the lowest, and a couple of estimates that have cracked the $1 billion mark. The time required to get a drug approved has doubled from about 7 years in 1964 to about 15 years. Considering that patent protection lasts about 17 years, you can begin to see one of the big problems here.

Unfortunately, the "pipeline" links in my reference link above seem to be no good any more, but I have seen such pages on other drug company sites, and they are quite educational. Here's a current one from Biogen, which I follow since my wife uses one of these medicines.

Keep in mind that not all drugs make it either. Hundred of millions down the toilet.

Those of us who see things automatically from a free market perspective also see something that is not obvious in this situation: The massive regulatory requirements for supplying medicine to the marketplace make it almost impossible for small companies and anyone other than a gigantic corporation to compete in this field. Could this have a little something to do with the drug price situation? As usual, monopolies can often be tracked to some government monkeywrench thrown into the market machinery.

Your suspicion that there is more than a little mixed-economy hanky panky going on between giant drug companies and the government is probably correct. Given the massive power of the government over the entire industry, it would be almost inevitable.