Abstract
In the debate over prescription drug pricing, some pharmaceutical industry critics claim that U.S. taxpayers pay twice for costly therapies, because publicly supported research is a major contributor to drug discovery and American taxpayers are inadequately rewarded for their research investment due to high drug prices. In fact, the empirical evidence supporting these claims is weak, and the pay twice argument distracts from important efforts to ensure that impactful new drugs continue to be developed and made widely available to patients who need them.
Highlights
Do pharmaceutical companies unfairly bilk American patients when they charge exorbitant prices for drugs developed based on publicly funded research? In a hearing of the House Committee on Oversight and Reform in January, 2019, U.S Representative Alexandria Ocasio-Cortez of New York argued that “the public is acting as early investor, putting tons of money into the development of drugs that become privatized, and they receive no return on the investment that they have made”
To what extent is public funding responsible for the invention of most new drugs? Second, are U.S taxpayers inadequately rewarded for their contribution to new drug development? And third, how are these claims salient to the national debate over drug prices?
Are new drugs invented by publicly funded researchers? There is little debate that public funding of basic science is a critical enabler of drug development1,2
Summary
Do pharmaceutical companies unfairly bilk American patients when they charge exorbitant prices for drugs developed based on publicly funded research? In a hearing of the House Committee on Oversight and Reform in January, 2019, U.S Representative Alexandria Ocasio-Cortez of New York argued that “the public is acting as early investor, putting tons of money into the development of drugs that become privatized, and they receive no return on the investment that they have made” (see video recording from Twitter). A recent study found that for only 25 percent of drugs approved from 2008 to 2017 was there any documented contribution, of any magnitude, to a drug’s initial discovery, synthesis, or key intellectual property by a public sector research institution or academic “spin-off” company7 This finding corroborated a review of approvals from 1998 to 2007, which found that publicly funded research helped either identify the chemical structure of the final compound or its direct antecedents or demonstrated therapeutic proof-of-concept for the target for only about a third of new drugs. Proposals to eliminate out-of-pocket costs and ensure the availability of cheap generics after patent expiry could improve access to drugs by reducing patient-borne expenses30 These ideas all entail significant tradeoffs related to innovation that are incompletely understood, and reasonable stakeholders can disagree about how to weigh these tradeoffs given this inherent uncertainty. Data availability Underlying data No data are associated with this article
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