Apr 9, 2021

Government Report Finds No Relationship Between Drug Company R&D and Prescription Drug Prices

Washington, D.C. – The Campaign for Sustainable Rx Pricing (CSRxP) released a statement Friday responding to a new report from the Congressional Budget Office (CBO) titled “Research and Development in the Pharmaceutical Industry,” which confirms that pharmaceutical research and development (R&D) costs do not have a relationship to the prices drug companies set on their products.

“CBO’s findings further undermine Big Pharma’s bogus rhetoric that solutions to lower drug prices and hold the industry accountable will negatively impact innovation into new cures,” said CSRxP executive director Lauren Aronson. “The evidence is clear that research and development investments have no relationship to prices set by brand name drug companies on their products and now is the time to advance bipartisan, market-based solutions to hold Big Pharma accountable and lower prescription drug prices for struggling Americans.”

In the report, CBO concludes: “Importantly, when drug companies set the prices of a new drug, they do so to maximize future revenues net of manufacturing and distribution costs. A drug’s sunk R&D costs—that is, the costs already incurred in developing that drug—do not influence its price.”

The report underscores findings from CSRxP’s 2019 “Big Pharma Dollar” study which found that the largest pharmaceutical manufacturers in the U.S. spend more boldly on advertising, profits and overhead than R&D. The study found that Big Pharma spends more than 80 percent of every dollar on something other than R&D.

In 2014, the U.S. Senate Committee on Finance concluded that Big Pharma pricing on the drug Sovaldi was determined by the pursuit of higher profits, not based on R&D.

Read CBO’s full report HERE.

Read CSRxP’s full “Big Pharma Dollar” study HERE.

Read Senator Wyden & Grassley’s report on Sovaldi HERE.