Do big R&D bud­gets jus­ti­fy US pre­mi­um drug prices? No way, an­a­lysts scoff

Do you want a new for­mu­la for cal­cu­lat­ing “ex­cess” prices paid for brand­ed drug prices? A group of health­care re­searchers found a ripe prospect: Tack­ling the pre­mi­um built in­to US drug costs.

Big Phar­ma R&D is a game of block­busters. Find­ing one, get­ting one ap­proved and then build­ing the mar­ket is a multi­bil­lion-dol­lar quest. And there’s been con­sid­er­able fo­cus on the US pre­mi­um, the ex­tra that big bio­phar­ma col­lects in this coun­try while sell­ing the same drugs in tight­ly con­trolled sin­gle-pay­er mar­kets in Eu­rope for much, much less.

That US pre­mi­um, the com­pa­nies of­ten in­sist, is es­sen­tial to ac­com­mo­date huge R&D bud­gets re­quired to cov­er the bil­lions in av­er­age costs for new drug de­vel­op­ment, what Pres­i­dent Trump and oth­ers re­fer to as a huge sub­sidy that this coun­try pays to help oth­er coun­tries who won’t share the load of in­no­va­tion.

Writ­ing in Health Af­fairs, though, a trio of in­ves­ti­ga­tors says the ar­gu­ment is bunk. They crunched the num­bers on the list ex-US price against the av­er­age net in the US, us­ing VA and Med­ic­aid dis­counts to try and achieve a clear­er pic­ture of the bot­tom line for man­u­fac­tur­ers. And they found that the US pre­mi­um paid for the top 20 drugs on the mar­ket far ex­ceeds the to­tal amount the same 15 com­pa­nies spent on their glob­al R&D bud­gets.

That pre­mi­um, they say, nets 15 com­pa­nies $116 bil­lion in ex­tra an­nu­al rev­enue, com­pared to $76 bil­lion in to­tal re­search spend­ing. And 3 com­pa­nies earn more in pre­mi­um pric­ing for one prod­uct than they spend on re­search each year: Ab­b­Vie — Hu­mi­ra, Bio­gen — Tec­fidera; and Te­va – Co­pax­one.


Nan­cy Yu, Zachary Helms and Pe­ter Bach — fi­nan­cial an­a­lysts at the Cen­ter for Health Pol­i­cy and Out­comes at Memo­r­i­al Sloan Ket­ter­ing Can­cer Cen­ter — write:

We found that the pre­mi­ums phar­ma­ceu­ti­cal com­pa­nies earn from charg­ing sub­stan­tial­ly high­er prices for their med­ica­tions in the US com­pared to oth­er West­ern coun­tries gen­er­ates sub­stan­tial­ly more than the com­pa­nies spend glob­al­ly on their re­search and de­vel­op­ment. This find­ing coun­ters the claim that the high­er prices paid by US pa­tients and tax­pay­ers are nec­es­sary to fund re­search and de­vel­op­ment. Rather, there are bil­lions of dol­lars left over even af­ter world­wide re­search bud­gets are cov­ered.

If you take out the pre­mi­um US pay­ers cov­er for these drugs rel­a­tive to R&D spend­ing, you could save $40 bil­lion off of the to­tal $325 bil­lion paid for drugs in 2015.

Don’t look for any rapid adop­tion in the US, though. These com­pa­nies aren’t in the busi­ness of cov­er­ing costs, and bleed­ing prof­its isn’t on the agen­da in Wash­ing­ton DC. Trump’s fo­cus, to the ex­tent we un­der­stand it so far, is to make drug de­vel­op­ment sim­pler, with few­er reg­u­la­to­ry re­quire­ments and there­by less ex­pen­sive, of­fer­ing a route to low­er costs. This new piece un­der­scores, though, that there is no di­rect re­la­tion­ship be­tween re­search spend­ing and block­buster drug prices.

The sto­ry trig­gered an in­ter­est­ing round of com­ments on Twit­ter this morn­ing.

“If the ar­gu­ment is disin­gen­u­ous figleaf­ing for mo­nop­oly pric­ing be­hav­ior, it has now al­so been fal­si­fied,” Bach re­spond­ed to crit­i­cism of his piece.




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Who’s spend­ing and who’s cut­ting from Big Phar­ma’s $127B R&D bud­get? Here are the top 15 play­ers

A couple of the Big 15 biopharma companies in R&D hit the gas on research spending last year. Merck and Sanofi still have lots to prove in the pipeline, and they’re willing to gamble large sums to make a better future for themselves.

Doing nothing would be infinitely worse.

But collectively, the top players rang up a modest 2.4% increase in spending in 2022, which didn’t cover inflationary pressures. And that set the tone for an extraordinarily cautious year for the industry — even as it laid out about $127 billion to advance new drugs or up the ante on approved therapies.

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Jeff Bluestone (R), Sonoma Biotherapeutics CEO

Jef­frey Blue­stone brings his start­up haul to $400M+, join­ing forces with Re­gen­eron on cell ther­a­pies

These days, when Jeffrey Bluestone gets together with his contemporaries in science, the conversation often turns to retirement plans.

But a little more than three years ago, Bluestone reached a momentous turning point in his career, exiting a prestigious post at UCSF, where he had spent decades in the scientific pursuit of new therapies. And it had nothing to do with retirement anytime in the near future.

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Sally Susman, Pfizer EVP and chief corporate affairs officer

Q&A: Pfiz­er cor­po­rate com­mu­ni­ca­tions chief Sal­ly Sus­man dis­cuss­es book craft­ed in pan­dem­ic and per­son­al lessons

From the political arena to the finance and beauty industries to pharmaceuticals, Pfizer’s Sally Susman has broken barriers, stereotypes and conventions. And now the chief communicator is “Breaking Through,” the title of her first book about effective and innovative communications launching today. The full official title is “Breaking Through: Communicating to Open Minds, Move Hearts, and Change the World.”

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Gun­ning for 2023 ap­proval, GSK de­tails PhI­II da­ta for Jem­per­li in front­line en­dome­tri­al can­cer

GSK has a new slate of data to offer on its PD-1 inhibitor, Jemperli — data that the pharma giant hopes will cement one of the four drug approvals it’s expecting this year.

While Jemperli (dostarlimab) is already approved for a subset of patients with second-line endometrial cancer, GSK set out in the Phase III RUBY trial to test it as an earlier line of treatment while also enrolling a broader group of patients. In an interim analysis, Jemperli was shown to extend progression-free survival for both the subset and the overall trial population when added to chemotherapy.

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Es­pe­ri­on sues Dai­ichi Sankyo, de­mand­ing pay­ment of $300M mile­stone for car­dio drug

Esperion is suing its business partner Daiichi Sankyo, saying the Japanese drugmaker is improperly refusing to pay a $300 million milestone that the biotech company will be owed after reporting positive data from a large trial of its cardiovascular drug Nexletol.

The 2019 deal between the companies had Daiichi Sankyo pay $150 million upfront plus another $150 million after the first sales of the drug. But another major payout was tied to an outcomes study reported this month, known as CLEAR. Esperion, in its suit against Daiichi, argues that the drug’s more than 20% reduction of heart attack risk is enough to trigger a $300 million payout from Daiichi once it’s added to the drug’s label.

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Eli Lil­ly to in­crease in­vest­ment to $1B in­to new Irish man­u­fac­tur­ing fa­cil­i­ty — re­port

The US pharma giant Eli Lilly will be increasing its financial commitment to a manufacturing site in Ireland.

According to a release from Ireland’s Industrial Development Agency (IDA) on Monday, Lilly will be investing another $500 million in its manufacturing facility in Limerick, Ireland — bringing the total investment into the facility to approximately $1 billion.

In January of last year, Lilly announced it was placing a $446 million investment into the site to expand active pharmaceutical ingredient and monoclonal antibody production.

Uğur Şahin, BioNTech CEO (Andreas Arnold/picture-alliance/dpa/AP Images)

BioN­Tech read­ies for plunge in Covid sales, will boost mR­NA and on­col­o­gy pipelines

BioNTech is estimating €5 billion (nearly $5.4 billion) in Covid-19 vaccine sales this year, a marked drop from €17.1 billion ($18.5 billion) in 2022 — and way off analysts’ expectations of around €8 billion ($8.6 billion).

In BioNTech’s year-end earnings call on Monday, it reported a total of €17.3 billion ($18.7 billion) in 2022 revenue, almost all from vaccine sales, which include those via its Pfizer deal and direct sales.

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Mihael Polymeropoulos, Vanda Pharmaceuticals CEO

Van­da wins court case against FDA over dis­clo­sure of CRL de­tails for sleep drug

DC District Court Judge Christopher Cooper today granted Vanda Pharma’s request to require the FDA to disclose more info on the complete response letter for its sleep disorder drug Hetlioz.

The melatonin receptor agonist is approved by the FDA to treat non-24-hour sleep-wake disorder, a circadian rhythm disorder. But in 2018 Vanda filed a supplemental application to market Hetlioz as a treatment for jet lag, which the FDA rejected in August 2019, with few details on what Vanda needed to correct course, according to the company.