Why the drug industry and its critics are both wrong about how R&D spending affects pricing


6 October 2016 - The drug industry often claims that high prices are due to its high R&D costs, while industry critics argue that lower prices will not cut R&D. 

The evidence is clear that both sides are wrong and these arguments should be eliminated from the policy debate. Prices drive R&D spending, not vice versa.

Not surprisingly, the ongoing policy debate about drug pricing has the two sides of the market (buyers and sellers) taking conflicting positions. On one side, buyers—private and public payers, for example, and healthcare providers such as those at Memorial Sloan Kettering Cancer Center—claim that prices for drugs are too high, while sellers argue buyers are getting a bargain.

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Michael Wonder

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Michael Wonder