Look at any commodity market, with no barriers to entry, no IP protection, thin margins, say: making bread. The logic that everybody will stop making bread because there's more money to be made in making iPads is false.
The general rule is: as long as there is money to be made, people will compete for this money.
There's a lot of money to be made in drugs and as long as it's true, companies will compete for this money, even if the margins won't be as great as they are today.
Look at http://en.wikipedia.org/wiki/List_of_pharmaceutical_companie...: the top pharma company makes $12bn profit on $62bn of revenue with $7bn spent on R&D.
The $12bn is a lot of wiggle room and twice the amount they spend on R&D. They are making profits hand over fist.
The $7bn total spent on R&D also puts your $1bn per drug into question - does the biggest pharma company can only do 7 new drugs per year (and I'm really generous in assuming all of that R&D goes into developing new drugs)?
