> ## Content Index
> Fetch the complete content index at: https://www.fdaweb.com/llms.txt
> Use this file to discover other available public pages before exploring further.

# Drug R&D Can’t Justify High Prices: Study
- URL: https://www.fdaweb.com/drug-r-d-cant-justify-high-prices-study/
- Published: 2023-02-16T12:00:00.000Z
- Updated: 2026-09-14T18:16:20.000Z
- Author: David McFarland
- Tags: Drugs, #legacy-id-D5153797

Health policy researchers in the UK say their analysis of drug company financial statements shows that company claims that high drug prices are needed to provide money for research and development into new drugs don’t hold up. Writing in *thebmj*, they [call](http://press.psprings.co.uk/bmj/february/drugprice.pdf?ref=fdaweb.com) for government intervention or regulation to incentivize companies to refocus their spending and provide more innovative drugs at affordable prices.

“Analysis of drug company spending and products raises questions about the claim that high drug prices are needed to sustain valuable innovation,” the researchers argue. “Data suggest that drug companies are particularly profitable, even after adjusting for R&D spending as a share of revenues. There also seems to be a disconnect between product R&D costs and prices. One recent study found no association between how much drug companies spend on R&D and the prices they charge for new medicines.”

The study says that based on publicly available financial reports from 1999 to 2018, the 15 largest biopharmaceutical companies had total revenues of $7.7 trillion. In that period they spent $2.2 trillion on costs relating to selling, general, and administrative activities and $1.4 trillion on R&D. The researchers note that the precise details of what is included in R&D or selling and administrative activities can be unclear. “Notwithstanding this limitation,” they write, “it is clear that companies spent more on selling, general, and administrative activities than on R&D every year from 1999 to 2018, which is consistent with earlier evidence from 1975 to 2007.” The researchers also found that most of the companies also spent more on share buybacks than on R&D.

The study also notes that the justification of high drug prices ignores the considerable public investment in drug discovery and development. The authors say that more than a quarter of new drugs approved by FDA from 2008 to 2017 were linked to public investment during the late stages of development. “This means,” they explain, “that society is potentially paying twice for new drugs, first in the form of publicly subsidized research and second through high product prices.”

A further point made in the article is that most new drugs provide little or no added clinical value. “Many health needs remain unmet by the current pharmaceutical business model,” the authors write. “This includes neglected diseases, antimicrobial resistance, and other emerging infectious diseases. In many important markets, the current system rewards new products irrespective of comparative advantages or contribution to public health priorities…. Moreover, patents are awarded based on chemical novelty and inventiveness of the product, independent of the added therapeutic value.”

The authors suggest that given the spending patterns they found, in theory, the biopharmaceutical industry could generate more medically valuable innovation with its existing resources. “There should be no need to pass research and development costs on to patients and healthcare systems through ever higher and increasingly unaffordable prices,” they write. “This is unlikely to happen, however, without government intervention or regulation along the lifecycle of new medicines.” They suggest these possible actions:

- making national patent systems more stringent to avoid rewarding chemical novelty and inventiveness independent of added therapeutic value;
- clear communication by public health authorities on focused research and development priorities and the strategic use of public research funding to support them;
- smarter allocation of public research funds with retention of (partial) ownership that can be leveraged to pursue public health objectives, including affordable pricing;
- raising evidence standards for market authorization by requiring companies to conduct comparative clinical trials intended to establish added therapeutic value whenever possible; and
- reforming pricing and reimbursement systems to reward companies that develop drugs that deliver clinical benefit and discourage me-too and evergreening strategies.