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GAO Report Undercuts Pharma R&D Claims

Dec. 20, 2017

GAO Report Undercuts Pharma R&D Claims

Statement of Steven Knievel, Access to Medicines Advocate, Public Citizen

Note: The U.S. Government Accountability Office (GAO) on Tuesday released its report conducted on request of U.S. Sen. Bernie Sanders (I-Vt.) and U.S. Rep. Elijah Cummings (D-Md.) about pharmaceutical research and development (R&D) and business trends.

It’s time that Trump administration officials and legislators in Congress stop believing pharma’s smoke and mirrors and instead take concrete action to make medicine affordable.

After another week of the pharmaceutical industry obfuscating and shifting blame in front of Congress for unaffordable medicine, the GAO report released Tuesday shows yet again that R&D costs do not justify the unconscionable prices set by pharmaceutical corporations. While pharma and biotech revenues increased 45 percent from 2006 to 2015, worldwide industry-reported R&D spending increased only slightly – by 8.5 percent from 2008 through 2014.

Meanwhile, consumers paid for the “basic research [that] often supplies the innovation upon which the industry develops drugs” through $13.6 billion of basic research funding supplied by the taxpayer-funded National Institutes of Health (NIH). In contrast, the industry spent just $6.3 billion on basic research in 2014.

Pharma companies charge high prices to maximize profits, not because of innovation – the 25 largest pharma companies achieved profit margins beyond 20 percent in 2015 compared to 6.7 percent on average for the largest 500 companies overall.

The administration should provide U.S. patients and consumers the relief they need by exercising its existing authorities to allow generic competition for government-funded medical inventions under the Bayh-Dole Act and by allowing our government health programs to purchase low-cost generics through “government use” instead of rationing treatment.

Congress should pass legislation to leverage our negotiating power by allowing government negotiation of prescription medication prices, penalizing companies that spike prices and curbing abuses that lengthen pharma monopolies.