Rising Drug Prices Are Not Justified By Biopharmaceutical Companies’ Spending On Research And Development, According To New Analysis
In a new analysis published in the British Medical Journal this week, experts argued that high pharmaceutical drug prices are not justified by biopharmaceutical companies’ spending on research and development (R&D).
Aris Angelis, an assistant professor in health economics, revealed how between 1999 and 2018, the 15 largest biopharmaceutical companies in the world spent more money on selling, administrative, and general activities than fund allocation to R&D. It is important to note that these “general activities” include marketing.
Angelis and colleagues also pointed out how the majority of new drugs developed during this near-two-decade period provided little to no benefits over pre-existing treatments.
So, the team argued that if drug companies refocused their spending, then innovative drugs would be more accessible at affordable prices. They also called on changemakers to put forward legislation that prioritizes public health-oriented R&D.
Worries over the rising prices of new drugs have only grown over the last 10 years. In the United States, the estimated net price of newly-launched drugs skyrocketed from 2008 to 2021– increasing from about $1,400 a year to over $150,000, respectively.
Newly-developed drugs are not the only pain point, either, since older and more common drugs have also witnessed unexplained price hikes in recent years.
It has been a long-standing biopharmaceutical industry argument that high drug prices are necessary for sustaining R&D.
Still, while the authors of the analysis acknowledged that bringing new medications to market comes with significant financial risks, they claim that drug company spending does not relate to products.
For instance, financial reports from 1999 to 2018– which are publicly available– revealed that the 15 largest biopharmaceutical companies showed total revenues of $7.7 trillion.
Andrzej Tokarski – stock.adobe.com – illustrative purposes only
Throughout this same period, though, only $1.4 trillion was spent on R&D; meanwhile, $2.2 trillion was allocated toward selling, administrative, and general activities.
Many of these companies also spent more money purchasing their own stocks– also known as “buybacks”– as opposed to investing in R&D. According to the authors, this raises significant questions about the companies’ commitments to providing biopharmaceutical research that benefits public health.
The team also argued that the companies’ justification of high drug prices to pay for R&D ignores already large public investments in the discovery and development of drugs. In other words, people are paying twice for emerging drugs– first via research that is publicly subsidized and second via high market drug prices.
Additionally, the authors explained how most emerging drugs added little or no clinical value over older treatment options.
For reference, approximately 1 in 6– or 16%– of new drugs approved by the FDA in the 1970s and 1980s were considered to offer important therapeutic gains.
But, during the 2010s, analyses of drug evaluation reports conducted by health tech assessment bodies in Germany and France suggested that the majority of newer drugs are not offering significant clinical value. Instead, just a fraction was deemed to offer major or important therapeutic improvements.
The team did acknowledge how, between 1997 and 2016, most drugs under development targeted novel action mechanisms. But, the authors also indicated that there had been a shift in focus.
Rather than biopharmaceutical companies focusing on blockbuster drugs, which usually target chronic diseases and are sold in high global volumes, companies are developing “nichebuster drugs”– or drugs that target rare diseases and allow for a higher price point.
“Given the amount spent on non-research and development activities and that most new drugs add little or no therapeutic value, in theory, the biopharmaceutical industry could generate more medically valuable innovation with its existing resources,” the authors said.
However, they believe this is unlikely to happen unless there are regulations or government intervention throughout the lifecycle of new drugs.
In turn, the team argued that policymakers, health technology assessment bodies, drug regulators, and consumers must re-think what incentives will lead to valuable biopharmaceutical drug innovations.
“Creating policy and regulatory environments that will meet public health objectives,” they added.
“The world needs a truly value-based health-industrial ecosystem for incentivizing and rewarding improvements in health outcomes and population health throughout the lifecycle of new medicines.”
To read the analysis’ complete findings, visit the link here.
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