7 March 2017 - That pharmaceutical companies charge much more for their drugs in the US than they do in other Western countries has contributed to public and political distrust of their pricing practices. 

When these higher US prices (which are sometimes cited as being two to five times the prices in Europe) are challenged, the pharmaceutical industry often explains that the higher prices they charge in the US provide them with the funds they need to conduct their high-risk research.

This claim—that premiums earned from charging US patients and taxpayers more for medications than other Western countries funds companies’ research—is empirically testable. Pharmaceutical companies report their Research and Development (R&D) expenses in public filings, and both they and numerous other sources report a mix of information on their drugs’ prices and sales volumes in the US and other Western countries. These data allowed us to quantify both the premium companies earn and the amount they spend on research. We then assessed the relation between the two.

Read Health Affairs blog