Pharmaceutical manufacturers earned $18.6 billion in total global revenues, on average, for a new drug – 10 times more than drug development costs
WASHINGTON, D.C. – (December 13, 2021) – Everyone should be able to get the medications they need at a cost they can afford. But drug prices are still out of control, often through shenanigans like patent gaming and abuses of exclusivity. To more fully understand the impact of these practices, a new study from AHIP examines drug manufacturers’ revenues for branded drugs approved by the U.S. Food and Drug Administration (FDA) from 2001-2010.
AHIP estimated each drug’s total revenues over the duration of its exclusivity, either through patent or regulatory exclusivity. The study found:
- Drug manufacturers earned, on average, $18.6 billion in total global revenues for a new drug – 10 times more than the average $1.8 billion cost of new drug development.
- Americans are paying a disproportionately high percentage of those revenues. While the U.S. accounts for just 4% of the world’s population, it accounts for more than half (56%) of total drug revenues for a typical branded drug.
- Biologics are increasingly a big moneymaker. While biologics accounted for only 27% of new drugs, they represented 43% of total U.S. drug revenue. On average, U.S. revenues for biologic drugs ($17 billion) were twice as high as revenues for traditional non-biologic drugs ($8 billion).
- Longer exclusivity protections led to higher U.S. revenues. The average duration of exclusivity protection in the study sample was 14 years. Drugs with less than 12 years of exclusivity protection had earned, on average, $5 billion in U.S. revenues – less than half of average U.S. revenues. Drugs with exclusivity protection of 17 years or longer earned $23 billion – more than double the average U.S. revenues.
“Drugmakers create life-saving treatments and breakthrough cures. But that does not give them the right to price gouge Americans year after year with multiple price hikes without justification,” observes Matt Eyles, AHIP President and CEO. “Our researchers found that many drugs with long periods of patent protection are the result of Big Pharma shenanigans and anti-competitive tactics like patent thicketing, patent evergreening, and pay-for-delay settlements.”
Americans are paying the price for Big Pharma’s patent shenanigans every day. For example, a patent thicket litigation settlement between AbbVie, manufacturer of the blockbuster drug Humira, and Boehringer Ingelheim, manufacturer of a less costly biosimilar drug Cyltezo, means that while the FDA has approved Cyltezo as interchangeable for Humira, Cyltezo will not be available for American patients until July 1, 2023.
Policy Solutions for Increased Competition and Affordability
AHIP supports recent legislation to prohibit anticompetitive tactics and increase competition in the pharmaceutical market. That legislation includes:
- H.R. 2873, The Affordable Prescriptions for Patients Through Promoting Competition Act.
- H.R. 2884, The Affordable Prescriptions for Patients Through Improvements to Patent Litigation Act.
- H.R. 2891, The Preserve Access to Affordable Generics and Biosimilars Act.
- S.1428, The Preserve Access to Affordable Generics and Biosimilars Act.
- S.1435, The Affordable Prescriptions for Patients Act.
AHIP also supports legislative actions that would shorten the biologic exclusivity period from 12 years to 7 years – which is the exclusivity period currently offered to orphan drugs.
AHIP is the national association whose members provide health care coverage, services, and solutions to hundreds of millions of Americans every day. We are committed to market-based solutions and public-private partnerships that make health care better and coverage more affordable and accessible for everyone. Visit www.ahip.org to learn how working together, we are Guiding Greater Health.