Drug price controls may have little effect on R&D

Modest drug pricing reforms are not likely to stifle pharmaceutical innovation or jeopardize the future health of Americans, write researchers from the USC-Brookings Schaeffer Initiative for Health Policy in a new post.

Why is this important: Drugmakers have long argued that controlling the price of their products will lead to fewer new cures – a ‘nuclear winter’ argument that could be revived as Congress considers a lean Build Back Better package that includes cost reforms medication.

What they found: Big pharma has increased spending on shareholder payouts and stock buybacks far more than they have on R&D in past decades, write USC-Brookings scholars Richard Frank and Kathleen Hannock .

  • Much of the R&D is aimed at expanding franchises for existing blockbuster drugs and does not actually involve new drugs.
  • Emerging biopharmaceutical companies that spend less than $200 million per year on R&D account for a large portion of market innovation.

The other side: Pharmaceutical Research and Manufacturers of America, the pharmaceutical industry’s trade group, points to research that concludes that government pricing is chilling venture capital funding and investment in late-stage research.

  • “Continued downward pressure on prices in Europe has resulted in lower investment by the biopharmaceutical industry in the [European Union] compared to the United States,” the group says.

James V. Hayes