In a presidential election year where the high cost of prescription drugs has been a major campaign issue, JAMA joined the fray with a special issue on drug pricing.


Four studies — three in JAMA and one in JAMA Internal Medicine — along with a handful of editorials dig deeper into key questions about the U.S. pharmaceutical industry: Is pharma making too much money? Does it spend too much to influence politics? How much does it really cost to bring a drug to market?

Editorialists Chaarushena Deb, of Yale Law School in New Haven, Connecticut, and JAMA Deputy Editor Gregory Curfman, MD, wrote that the articles “paint a concerning picture about the relationships among rising drug prices, pharmaceutical industry profits, uncertainty about pharmaceutical R&D costs, and lobbying and political donations to gain influence with legislators.”

“We anticipate that publication of this information will further stimulate the ongoing national debate on prescription drugs and help rein in increasing drug prices while sustaining innovation in drug development, which is so critical to the health of individuals both in the U.S. and around the world,” they continued.

To address the complicated question of whether the drug industry is too profitable, Fred Ledley, MD, of Bentley University in Waltham, Massachusetts, and colleagues compared data from 35 large pharmaceutical companies’ annual reports with 357 other firms in the S&P 500, from 2000 to 2018.

They found the median profit margin for drug companies was nearly double that of non-pharmaceutical companies (13.8% vs 7.7%) during that time.

“Data on the profitability of large pharmaceutical companies may be relevant to formulating evidence-based policies to make medicines more affordable,” Ledley and colleagues wrote.

Some of those profits are being funneled into effective lobbying efforts: in the JAMA Internal Medicine paper, Olivier Wouters, PhD, of the London School of Economics and Political Science, reported that the pharmaceutical industry spent an average of $233 million per year from 1999 to 2018 on federal lobbying — more than any other industry, at 7.3% of all spending in that 20-year period (accounting for $4.7 billion of $64.3 billion). No other industry accounted for more than 5% of spending, they reported.

Industry paid $414 million to political candidates and action groups over those two decades, and $44 million to state-level candidates. Another $661 million went to ballot measure committees, typically related to costs of prescription drugs, according to the report.

“From a business perspective, the lobbying expenditures in the pharmaceutical and health product industry appear to be money well spent,” wrote Robert Steinbrook, MD, of the University of California San Francisco, in a separate editorial.

Steinbrook wrote similar articles on U.S. healthcare industry lobbying and campaign contributions in the 2000s and noted that “little has changed, with industries and organizations in the health sector continuing to spend substantial sums to influence the outcomes of elections, legislation, and regulations.”

To get a better idea about how much of those profits are actually spent on research and development — as the drug industry often claims that high returns are needed to fund “innovation” — Wouters and colleagues, in a separate paper, attempted a new method for addressing the perennial question of how much it costs to bring a drug to market.

They evaluated publicly available data from smaller biotech companies for 63 of the 355 new drugs approved by the FDA from 2009 to 2018, and came up with a median investment of $985 million, after “accounting for the costs of failed trials.”

That contrasts with an estimate of $2.87 billion published in 2016 that was widely criticized for relying on unpublished “proprietary” data, Deb and Curfman noted.

While the new estimate is lower, “it is still a considerable amount for smaller, start-up biotechnology companies to recoup from a new product,” they wrote.

Another hot-button issue has been relentless increases in drug list prices — which the Trump administration has tried to curtail by adding such information to advertisements, a measure that’s currently stalled in the courts.

Deb and Curfman explained the industry’s strategy: “increase list prices; offer discounts to partially offset the list price increases; restrain competition and enhance market share through optimal formulary placement; and increase volume of sales.”

However, they noted that patients don’t get those discounts (they go to insurers, pharmacy benefit managers, and/or retailers), and those who are uninsured or who have high-deductible plans feel the financial strain of having to pay list prices or those pricey deductibles.

Inmaculada Hernandez, PharmD, PhD, of the University of Pittsburgh, and colleagues looked at trends in list prices and net prices for 602 brand-name drugs from 2007 to 2018. They found that inflation-adjusted list prices rose 2.5-fold over that time, and net prices — after discounts and rebates — rose by 60%. Increases in discounts did offset 62% of the increases in list prices, but there was wide variability among different drug classes, they noted.

In yet another editorial, Merck CEO Kenneth Frazier, JD — whose company pledged to not raise list prices more than the cost of inflation — said the reports do show that the “biopharmaceutical industry is adjusting its business model in response to concerns about affordable access to medicines and is still making substantial research and development investments to sustain the innovation ecosystem.”

Frazier blamed the cost problem on downstream players in the drug sales chain. That part of the system is “still not working for patients who are paying more out-of-pocket due to the complex system of pricing, distribution, and above all, the regressive insurance benefit designs in which most patients are enrolled. This is true irrespective of the actual price of the medication. Solving this will take effort on the part of pharmacy benefit managers, insurers, government, industry, and other partners, and the biopharmaceutical sector must do its part to help patients now.”Last Updated March 03, 2020

Primary Source

Journal of the American Medical Association

Source Reference: Ledley FD, et al “Profitability of large pharmaceutical companies compared with other large public companies” JAMA 2020; DOI: 10.1001/jama.2020.0442.

Secondary Source

Journal of the American Medical Association

Source Reference: Wouters OJ, et al “Estimated research and development needed to bring a new medicine to market, 2009-2018” JAMA 2020; DOI: 10.1001/jama.2020.1166.

Additional Source

Journal of the American Medical Association

Source Reference: Hernandez I, et al “Changes in list prices, net prices and discounts for branded drugs in the U.S., 2007-2018” JAMA 2020; DOI: 10.1001/jama.2020.1012.

Additional Source

JAMA Internal Medicine

Source Reference: Wouters OJ “Lobbying expenditures and campaign contributions by the pharmaceutical and health product industry in the United States, 1999-2018” JAMA Intern Med 2020; DOI: 10.1001/jamainternmed.2020.0146.

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