New R&D Criteria, Same Pricing Problems

by Alicia Caramenico

May 15, 2017

Did you hear? PhRMA has announced that as a condition of membership, drug companies must spend at least 10 percent of their total sales on research & development. More than half a dozen companies have already been kicked out of the association because they can’t meet this standard.

But before we start patting PhRMA on the back, let’s consider the fact that PhRMA has basically admitted drug companies have not been spending enough on R&D.

And about this 10 percent “standard” … It’s a pretty low bar to meet. With all the industry’s claims that prices are high because of the extensive R&D underway, they’re saying 10 percent is sufficient. Where’s the other 90 percent of their spending going? We have known for years that most of Big Pharma spends more on sales and marketing than R&D, although PhRMA would have you believe otherwise.

The new R&D spending criteria also ignore the real problem of over-the-top drug pricing. A 10 percent R&D spending standard won’t prevent companies from setting artificially high prices or raising prices that put treatments and cures out of reach of patients.

That’s why AHIP is advocating for open and honest price setting as a way to ensure people to can access and afford the care they need. We need effective market-based solutions that deliver real competition, create more consumer choice, and ensure that drug prices are driven by the value they bring to patients.

Read our list of recommendations to reduce drug prices and costs.