High R&D is not necessarily the reason drugs are so expensive
Newswise — In the first known study of its kind, an international team of researchers assessed whether high research and development (R&D) costs explain high drug prices in the United States.
“There is a presumption that high R&D costs justify high drug prices. If this were true, then we would see a positive association between the two measures,” said first author Olivier Wouters, PhD, assistant professor at the London School of Economics and Political Sciences.
But in an article published on September 26, 2022, in Open JAMA NetworkWouters, in collaboration with colleagues at the Skaggs School of Pharmacy and Pharmaceutical Sciences at the University of California, San Diego, found no such association for 60 new drugs approved by the United States Food and Drug Administration. from 2009 to 2018.
The researchers compared data on R&D costs with drug prices. They found no relationship between what pharmaceutical companies spend on R&D and what they charge for new drugs. The authors also assessed whether a product’s therapeutic value was associated with its price, but found no association there either.
“Our results prove that pharmaceutical companies do not set prices based on their R&D expenditures or the quality of a drug. Instead, they charge what the market will bear,” said lead author Inmaculada Hernandez, PharmD, PhD, associate professor at the Skaggs School of Pharmacy and Pharmaceutical Sciences.
The pharmaceutical industry spent $83 billion on R&D in 2019, according to the Congressional Budget Office. It is estimated that companies spend between 1 and 3 billion dollars on average to bring a new product to market. In 2019, the US drug market generated more than $490 billion in revenue, accounting for nearly half of the global pharmaceutical market, according to database firm Statista.
Americans spend more on prescription drugs per capita than citizens of any other country. In 2019, that was over $1,200 per person. A 2021 Rand Corporation study found that drug prices in the United States were 2.56 times higher than those in 32 comparable countries. A Kaiser Family Foundation health tracking poll released earlier this year found that eight in 10 adults said the cost of prescribed drugs was unreasonable.
Congressional lawmakers have introduced numerous proposals in recent years aimed at putting downward pressure on drug prices. Pharmaceutical companies and trade groups have opposed these reforms, arguing that high drug prices are needed to recoup R&D investments. “If this argument is used to justify high prices and oppose measures to reduce prescription drug costs, pharmaceutical companies should provide additional data to support their claims that high drug prices are necessary to recover R&D investments,” Hernandez said.
The study authors acknowledged that the analysis was limited by the small sample size.
Co-authors include: Lucas A. Berenbrok and Yihan Li, University of Pittsburgh School of Pharmacy; and Meiqi He, UC San Diego.
Disclosure: Hernandez has received consulting fees from Bristol Myers Squibb and Pfizer, outside of published work.