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New study examines soaring drug prices

Critique towards soaring drug prices

New study examines soaring drug prices

23 February, 2023

Drug prices have long been a widely debated topic. In a new British study, researchers argue that pharmaceutical companies cannot use high development costs as motivation  for the soaring prices — especially as most new drugs provide  rather limited improvements in clinical benefit compared to  existing treatments.

When the US Food and Drug Administration approved Novartis‘ gene therapy Zolgensma in 2019, the drug’s high price tag caused many raised eyebrows. With a price of over 2 MUSD per dose, the drug, developed for the treatment of spinal muscular atrophy, was the world’s most expensive at the time. This is one example highlighted in an article in the medical journal The BMJ, where a British research team  took a closer look at the phenomenon of soaring drug prices.

Soaring median prices

In the article, the researchers highlight that US median drug prices wincreased from 1,400 USD per patient a year to over 150,000 USD  from 2008 to 2021. While many point to new treatments for rare diseases  as the main reason behind the increase in price ,  the researchers make it clear thatthis is not the whole story.

Prices are also rising for older, more common medicines. For example, according to the article, list prices for some insulin products have more than doubled between 2007 and 2018. A US government report singles out 1,216 products that, on average, increased in price by over 30 per cent between July 2021 and July 2022, well above  the rate of inflation during the same period.

More spent on sales and marketing

The research team has reviewed the finances of the world’s 15 largest biotech companies from 1999 to 2018, when total sales amounted to a staggering 7.7 trillion USD. Research and development spending during the period amounted to 1.4 trillion USD, while sales and marketing spending was 2.2 trillion USD. This is not all – the biotechs spent even more  money on dividends and share buybacks.

According to an investigation by the US House Committee on Oversight and Reform, the 14 largest pharmaceutical companies spent a total of 577 billion USD on dividends and buybacks between 2016 and 2020, which was 56 billion USD more than they spent on research and development.

A shift in recent years

However, the trend is that research spending as a share of sales has increased in recent years and that marketing spending has decreased. The authors of the article also acknowledge the fact that acquisitions and mergers nowadays play an important role in giving the large pharmaceutical companies access to new innovative medicines.

“Alongside evidence that large pharmaceutical companies are not involved in the discovery of most new drugs this suggests a shift of strategy from early-stage research and discovery to late-stage acquisition and development”, they write.

Few clinical breakthroughs

At the same time, the researchers raise the question of whether these innovations lead to any clear advancements in the treatment of  disease. Several studies in the US and Europe have shown that few drugs launched in recent years have added any real clinical value. Furthermore, only a fraction of the drugs have represented a major breakthrough.

On the positive side, however, the increasing proportion of drugs being developed for the treatment of rare diseases is highlighted. Between 2001 and 2005, 25 per cent of all approved drugs in the US targeted rare diseases. Between 2006 and 2020, that percentage had risen to 48 per cent, and in 2021 it amounted to more than 50 per cent.

Suggestions for improvement

In summary, the authors of the article do not see any reason for  companies to pass on increased costs for research and development to patients through sharply increased drug prices. According to them, companies in the biotech industry should be able to generate more clinically valuable innovations with current resources. In the article, they list a number of proposals for authorities aimed at better directing research towards the medical needs that actually exist.

One proposal is to make patent systems more stringent in order to avoid simply rewarding chemical innovations that do not add any real clinical value. Better communication is also requested from health authorities regarding development priorities and how to strategically use public research grants. The researchers also propose reforms to reward companies that deliver clinical benefit while discouraging strategies that involve copying or extending the exclusivity of drugs.

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