Jun 3, 2022 - Health

Drug price controls may have little effect on R&D

Illustration of a microscope with shapes and dollar elements.
Illustration: Gabriella Turrisi/Axios

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

Why it matters: Drugmakers have long claimed that controlling the price of their products would result in fewer new cures — a "nuclear winter" argument that could be revived as Congress eyes a slimmed-down Build Back Better package that includes drug cost reforms.

What they found: Big drug companies boosted spending on shareholder payouts and stock buybacks much more than they did on R&D in recent decades, USC-Brookings scholars Richard Frank and Kathleen Hannock write.

  • Much of the R&D is directed at extending the franchises for existing blockbuster medications and doesn't actually involve new drugs.
  • Emerging biopharma companies that spend less than $200 million a year on R&D account for much of the market innovation.

The other side: Pharmaceutical Research and Manufacturers of America, the drug industry trade group, points to research that concludes government price-setting chills venture capital funding and investment in late-stage research.

  • "The continued downward pressure on prices in Europe has led to declines in biopharmaceutical industry investments in the [European Union] relative to the United States," the group states.
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