Taking on the R&D myth
By Just Treatment organiser Elizabeth Baines.
The question I’ve been asked most frequently since getting involved with Just Treatment is: how can we expect drug companies to invest in developing new drugs if we force them to reduce their prices?
It’s a good question. However it’s based on the assumption that what the pharmaceutical industry tells us about their investment into research and development (R&D) is true.
Recently we wrote to the drug company Pfizer about their sky high price for breast cancer drug palbociclib (Ibrance). They had priced the drug at £140 per pill while we knew it could be made and sold at a profit for only £1. How did they justify this incredible markup to us? In large part by telling us about the high expense of drug development and research. In the second of a series of blogs we have been writing in response, we’re looking at some of Pfizer’s claims and why they’re wrong.
“around 40% of R&D health expenditure comes from public or philanthropic sources”
Pfizer told us: “Nine in ten medicines are discovered and developed by the pharmaceutical industry.”
This is not what the evidence says. Around a third of new medicines originate in public research institutions. In the US, every single one of the 210 new drugs that was been licensed between 2010 and 2016 received some level of public funding. In the UK, around 40% of R&D health expenditure comes from public or philanthropic sources.
There are many examples of highly priced drugs whose scientific basis was funded by the taxpayer - here are a few:
- Breast cancer drug palbociclib (Ibrance) - the fundamental scientific discoveries on which the drug is based were made by three Nobel Peace Prize winning laureates in publicly funded institutions.
- Breast cancer drug pertuzumab (Perjeta) - manufactured by the drug company Roche. The scientific basis underpinning the drug was carried out at the UK Medical Research Council Laboratory of Molecular Biology (MRC LMB) in Cambridge, which is publicly funded via the UK Medical Research Council (opens in PDF).
- Hep C drug sofosbuvir (Sovaldi) - pharmaceutical company Gilead’s highly controversial hepatitis C drugs, which came to the market in the UK at a whopping £34,983 for a twelve week course. The development was carried out at Emory University before being bought up by the drug company and sold at such a high price that it was rationed in the UK.
So when Pfizer tell us that a “single medicine can take 12 years, 1,600 scientists, half a million lab tests to create”, that doesn’t mean that the drug company has funded it.
Pfizer go on to claim that “in 2016, Pfizer invested over $7.87 billion globally in R&D in the search for new medicines.”
That sounds like a lot of money. Yet in 2016 Pfizer’s turnover was a whopping $52.8bn! Ian Read, Pfizer’s CEO, received a total compensation package that year of $17.3m. In fact, drug companies spend more on marketing and buying back their own shares than they do on R&D.
So when Pfizer tell us that they “need to make a profit on the medicines we produce so that we can reinvest back into R&D”, this does not mean that more expensive medicines are resulting in much higher R&D expenditure.
Drug companies have a long history of secrecy when it comes to revealing how much R&D actually costs. Industry funded studies claim the cost of developing and bringing a new drug to market is $2.87bn. But this number is hotly disputed by independent experts who say the truth is much, much lower. Not for profit medical research organisation DNDi can do it for €150m.
“Drug companies have a long history of secrecy when it comes to revealing how much R&D actually costs.”
This lack of transparency around industry R&D figures allows pharmaceutical companies to keep claiming the cost of innovation justifies their high drug prices without having to prove it. And leads to drugs like palbociclib being priced at 140 times more than it could be profitably sold for.
When the true cost of R&D remains so secretive and Pfizer are only spending 15% of their annual revenue on R&D, we know it’s time to challenge these prices and demand a fairer and more transparent deal for patients.