Big pharma says drug prices reflect R&D cost. Researchers call BS

There was good news at the end of September, when Relyvrio was approved for use in the US. It was described as a long-sought victory for patients.

The price of the medicine was disclosed the next day. The Institute for Clinical and Economic Review had estimated the price to be between $9,100 and $30,700.

Americans, though, probably weren’t shocked. Prescription drugs in the US cost about 2.5 times what they do in other countries, and a quarter of Americans find it difficult to afford them. Almost every new cancer drug starts at over $100,000 a year. And a 2022 study found that every year, the average price of newly released drugs is 20 percent higher. Advertisement

The price of drugs in the US is a mystery. A high price is needed to make good on the money invested in research and development when rationalizing price tags.

Is that correct? Wouters is an assistant professor at the London School of Economics and Political Science. I wanted to get some data because I don't think it's true. I don't believe in it.

That's what Wouters did. He and his colleagues published a new paper in September of 2022. There was publicly available information about both R&D spending and pricing for 60 drugs that had been approved by the FDA over the course of a decade. They compared the figures. He says that it was like investigative journalism and that it was like checking all the receipts. It would be expected that there would be a high correlation between R&D spending and high drug prices. They couldn't find a correlation.