[Ip-health] ​Al Engleberg: How Government Policy Promotes High Drug Prices

Jamie Love james.love at keionline.org
Fri Oct 30 04:41:21 PDT 2015

​Al Engleberg is a long time observer and player regarding policies about
innovation and drug development.    He has a blog in Health Affairs on drug
pricing.  I am attaching a link and also a few quotes from his commentary.


How Government Policy Promotes High Drug Prices

Alfred Engelberg

October 29, 2015

​...  [snip]​

Annual industry expenditures on research have averaged less than 15 percent
of sales and have less impact than that on profit because of the tax
benefits associated with research spending. The industry’s enormous profits
are what remains after all of its research and marketing expenses which is
why the industry is awash in cash.

Pfizer now holds $74 billion in unrepatriated profits overseas and Merck
holds $60 billion — enough to fund their respective annual research budgets
for 10 years. Meanwhile, taxpayers are spending $30 billion a year on basic
biomedical research the benefit from which flows to the pharmaceutical
industry free of charge.

Under current law, ownership of the patents on drugs discovered with
taxpayer money is given away to the academic institutions that discover
them. They license those patents to the pharmaceutical industry in exchange
for the payment of a royalty which the public actually pays since the
royalty increases the price charged for a drug. Federal law essentially
socializes the cost of drug discovery while privatizing the profits since
it does nothing to limit the prices that can be charged or the profits that
can be earned from drugs discovered at public expense.

​. . . ​  [snip]

For decades, Congress has simply been transferring wealth from ordinary
citizens to the pharmaceutical industry. While claiming to believe in free
market capitalism, it has created a web of monopolies which cause the
United States to pay the world’s highest prices for drugs even though it is
the largest purchaser. The US would save $80 billion annually if its per
capita drug costs were only 50 percent higher ($750 per capita), rather
than 100 percent higher, than those of other developed countries. Investing
some of those savings to accelerate the development of cures for our most
costly diseases could eventually reduce health care costs and justify a
high price for life-saving medicines.

​    [snip]​

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