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Big Pharma (Falsely) Claims Drug Prices Reflect Research & Development Costs


“A new study has found no correlation between research and development spending and outlandish drug prices.” [Source:]


Pharmaceutical companies frequently claim that high prices are needed to recoup spending on drug research and development. Logically, therefore, if high research and development costs were truly the cause of high drug prices, then from an accounting perspective a demonstrable relationship between costs and pricing would be expected.

Published in the Journal of the American Medical Association (JAMA), the new study tests this idea by examining the 60 drugs that had been approved by the United States Food and Drug Administration (FDA) between 2009 and 2018, for which there was publicly available information about both research and development spending and pricing. Contrary to what the pharmaceutical industry claims, the study authors found there was no correlation.

Regular visitors to our website will of course not be surprised by this finding. In reality, the vast profits of the pharmaceutical industry are based on the patenting of new drugs. These patents essentially allow drug manufacturers to arbitrarily decide the prices – and therefore the profits – for their products. As a result, in the United States, the cost of prescription drugs – even after discounts – rose over three times faster than the rate of inflation during the past decade.

To learn the truth about the pharmaceutical industry and its ‘business with disease’, see the ‘Laws of the Pharmaceutical Industry’ feature on our website.