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Updated: Pharma Profits Continue to Dwarf R&D Spending as Pressure Mounts

Posted 27 March 2017 | By Zachary Brennan 

Updated: Pharma Profits Continue to Dwarf R&D Spending as Pressure Mounts

With the repeal of Obamacare on life support, the furor over rising prescription drug prices and President Donald Trump’s support for the cause could end up filling the vacant crossroads where bipartisanship meets change.

On Monday, Public Citizen released a new report  [Editor's note: This report has since been retracted by Public Citizen due to methodological issues] trying to dispel the pharmaceutical industry’s allegations that high drug prices are unavoidable because of hefty research and development (R&D) expenses to bring new medicines to market.

That report plays directly into comments made last week by Trump when he met with members of the Congressional Black Caucus and reiterated his concerns about how expensive medicines are in the US when compared to other countries.

“But we’re going to bid on drug prices, and we’re going to try and have the lowest prices anywhere in the world, from really the highest.  And that’s not only the drugs, it’s prescription drugs,” he told the CBC, according to a readout of the meeting. “So we’re going to be instituting a very, very strong bidding process. We’ll probably need some legislation, but we’re going to do it regardless. We have to do it. And we’re going to get drug prices way down, way down.”


Health Affairs piece from earlier this month noted that “the premiums pharmaceutical companies earn from charging substantially higher prices for their medications in the US compared to other Western countries generates substantially more than the companies spend globally on their research and development.”

But the criticisms of drug pricing are coming from within the industry too. In December, Regeneron CEO Len Schleifer said at a panel discussion at Forbes' health summit: "The real reason we’re not liked is that we’ve used price increases to cover up the gaps in innovation. That’s just a fact."

Policy Changes Coming?

Although the issue of skyrocketing drug prices is one that has rankled and seen support from both sides of the aisle, pharmaceutical companies spend hundreds of millions per year on lobbying Congress and there will be considerable pushback to any reforms.

In terms of possible areas of change, the new House Energy & Commerce Committee chairman Rep. Greg Walden (R-OR) in February discussed considering reforms, as Trump has suggested time and again, to allow the government to negotiate drug prices more aggressively and pass the savings on to consumers.

Similarly, measures introduced this month by Rep. Doug Collins (R-GA) would also increase transparency around pharmaceutical prices and pharmacy benefit managers, while bills introduced by Democrats would allow for more pharmaceutical imports to ease some cost pressures.

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