At the end of September, some good news: Relyvrio, a new drug to treat amyotrophic lateral sclerosis, or ALS, a neurological disorder with no cure, was approved in the United States. The ALS community rejoiced; authorization of the drug was described as a “victory long sought by patients”.
But the next day, the price of the medicine was revealed: $158,000 a year. This was much higher than what the Institute for Clinical and Economic Review, an independent nonprofit organization that analyzes health care costs, had Estimate it would be a reasonable price, which he estimated between $9,100 and $30,700.
However, Americans were probably not surprised. Prescription drugs in the US cost about 2.5 times what they do in other countries, and a quarter of Americans find it hard to afford them. Almost all new cancer drugs start in more than $100,000 a year. And a 2022 study found that each year, the average price of newly launched drugs is 20 percent higher.
The way drug prices are set in the US is a mysterious black box. In rationalizing their high prices, one of the most common reasons pharmaceutical companies cite is that a high price is needed to do Okay in the money invested in research and development.
But is that true? “You hear it a lot,” says Olivier Wouters, an assistant professor of health policy at the London School of Economics and Political Science. “That’s why I said, well, let’s get some data, because I don’t think so. I don’t think anyone believes that.”
So Wouters did exactly that. In September 2022, he and his colleagues published a new paper in JAMA who took this simple argument and put it to the test. In the study, they looked at the 60 drugs that had been approved by the US Food and Drug Administration (FDA) between 2009 and 2018 for which information on R&D spending and pricing was publicly available. And then matched the numbers. “Essentially, it was like investigative journalism: check all the receipts, track what they spent over time,” he says. If it were the case that R&D spending was the reason behind high drug prices, I would expect to see a high correlation between the two. Instead, they found no correlation.
Wouters acknowledges that the sample size in the research is small, but this is because drug companies keep most of their financial data under lock and key. If the industry wants to refute the conclusion reached in his article, then drug companies must make more data available, he says.
For anyone in the field, the answer to the article finding is: well duh. We know what drives drug prices, says Ezekiel Emanuel, chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania. “It’s, ‘How far can I go? What will the market bear?’” Still, Emanuel says, it’s important to have empirical data like this study to refute the industry’s claim.
Intuitively, it feel It is plausible that the price of a drug is linked to its R&D costs: the risky business of innovation is very expensive, right? It turns out that even this is highly controversial. In 2020, Wouters published another article in JAMA which investigated how much it really costs to bring a new drug to market, something experts have been trying to figure out for decades. The number thrown around most comes from a paper, which was based on confidential data provided by pharmaceutical companies, estimating that it takes around $2.8 billion. “These estimates are shrouded in secrecy. There is a lot of controversy around them,” says Wouters. He and his colleagues instead found the figure closer to $1.3 billion, less than half the usual estimate. Substantially lower R&D costs would suggest that this expense should not have as large an influence on drug prices.
