Big Pharma Says Drug Prices Reflect R&D Cost. Researchers Call BS

United States. The ALS community rejoiced; the drug’s authorization was described as a “long-sought victory for patients.”

 

But the next day, the price of the medicine was revealed: $158,000 a year. This was far higher than what the Institute for Clinical and Economic Review, an independent nonprofit that analyzes health care costs, had estimated would be a reasonable price, which it deemed 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.

 
 

How drug prices are set in the US is a mysterious black box. When rationalizing their lofty price tags, one of the most common reasons pharmaceutical companies will cite is that a high price is needed to make good on the money invested in research and development.

But is that true? “You hear it so much,” says Olivier Wouters, an assistant professor of health policy at the London School of Economics and Political Science. “That’s why I was like, well, let’s get some data, because I don’t believe it. I don’t think anyone believes it.”

 

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