Pharmaceutical companies often cite research and development spending to justify high drug prices in the U.S. But they make much more from those high prices than they spend on R&D, researchers found.
According to research published on the Health Affairs blog, the 15 drug companies that made the 20 best-selling drugs worldwide in 2015 made $116 billion in excess revenue from premium drug prices in the U.S. Meanwhile, they spent only $76 billion on global research and development.
The excess revenue comes from drug prices that are much higher in the U.S. than in Canada, Denmark, Ireland and the U.K., the researchers said. Drug prices in those countries for the 15 companies studied were 41% of their U.S. counterparts on average.
U.S patients, businesses and taxpayers would have saved about $40 billion in 2015 if the 15 companies had lowered the premium prices they put on drugs in the U.S. so they were equivalent to global R&D spending, the researchers found. In 2015, Americans spent $325 billion on pharmaceuticals, according to the CMS.
Some companies, including Biogen and Teva, raked in more than double their global R&D budgets via U.S. premium drug pricing. Biogen made enough from premium pricing of just one product—its best-selling multiple sclerosis drug Tecfidera—to cover all of its R&D spending, and Teva did the same with its multiple sclerosis drug Copaxone.
A few companies, such as AstraZeneca and Novartis, pulled in excess revenue that was roughly the same as their R&D spending.
Drug prices have long been a high-profile issue in the U.S., and Donald Trump recently announced on Twitter that he's working on a “new system” that will bring U.S. drug prices “way down.”
As it stands, some patients can't afford prescription drugs. In 2013, the Centers for Disease Control and Prevention found that 7.8% of U.S. adults tried to save money by not taking their medication as prescribed, and 15.1% asked doctors for cheaper medications.
High drug costs put hospitals in a tight spot too. Increases in drug costs affect how hospitals compensate their employees and upgrade their facilities and technology, the CEOs of the American Hospital Association and the Federation of American Hospitals said in a 2016 report.
According to the report, presented by NORC at the University of Chicago, more than 90% of the hospitals surveyed said rising inpatient drug prices moderately or severely affected how well they could manage costs.
The social research organization noted that hospitals buy pharmaceuticals in large quantities and treat patients—frequently in emergency departments—who themselves cannot afford drugs. Between fiscal 2013 and fiscal 2015, inpatient drug spending at U.S. community hospitals rose by 23.4%.