Second Opinion: R&D Is Not To Blame For Skyrocketing Drug Costs

The jig is up – a new report showsthat “the skyrocketing cost of many prescription drugs in the U.S. can be blamed primarily on price increases, not expensive new therapies or improvements in existing medications as drug companies frequently claim.”

The new research, published in Health Affairs, shows that drugs are increasing at a rate faster than inflation in large part because of Big Pharma’s focus on their bottom line. As the study’s lead author, Inmaculada Hernandez, puts it:

“In the brand-name market, there was inflation of drugs that have been around for a while, that were exactly the same as they were the previous year … They are the same drugs they used to be. Prices are increasing because the market is bearing it.”

That shouldn’t come as a surprise, as health expert Avik Roy wrote: “in the absence of competition, manufacturers frequently charge the highest prices they believe they can justify in the court of public opinion.”

Pharmaceutical companies love blaming price increases on a whole host of factors, including the high cost of research and development (R&D). The truth is, Big Pharma’s profits continue to far exceed spending on R&D and as Johns Hopkins University Health Policy and Management Professor Gerard Anderson points out:

“Research and development is only about 17 percent of total spending in most large drug companies … Once a drug has been approved by the FDA, there are minimal additional research and development costs, so drug companies cannot justify price increases by claiming research and development costs.”

Drug makers often say that actions to increase transparency and competition will stifle innovation and medical advancements. In reality, these companies are spending more on advertising existing drugs than researching and developing new ones, and they’re raking in record profits, while one-in-four patients cannot afford the medications they need most.

As healthcare economist Craig Garthwaite stated, “[Big Pharma is] in business for their shareholders, full stop.”