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Before the IRA began negotiating prices on behalf of Medicare, industry officials worried that cost-cutting would lead to a divestment of investment in the pharmaceutical industry. New Analysisthose estimates were likely exaggerated.
The analysis suggests that even if global pharmaceutical revenues declined by up to 10%, the industry could maintain current levels of drug approvals, and large companies could strategically allocate their R&D spending in a way that would allow them to maintain both current product approval levels and profits.
The paper, by researchers at Bentley University’s Center for Science and Industry Integration, found that for small biotech companies, which sponsor the majority of clinical trials, there is no relationship between R&D spending and revenue. Instead, these companies typically raise most of their R&D funding through new investments in public offerings.
the This is not the first time The study casts doubt on the relationship between research and development costs and drug prices. Report A report published last year said drug prices were “not justified” by investments in research and development.
Biotech Blues
A 2023 study used public financial reports from 1999 to 2018 to find that the 15 largest biopharmaceutical companies spent $1.4 trillion on research and development. In contrast, the same companies spent a significantly higher $2.2 trillion on costs related to selling, general and administrative activities.
While a new study found a relationship between revenue and R&D spending for the largest pharmaceutical companies (defined by the study as those with a market capitalization of more than $7 billion), these large companies do not account for most of the innovation in new products.
Instead, the researchers pointed to data showing that in recent years, small startups have originated 67% of new drugs, sponsored 64% of late-stage clinical trials, and are responsible for 40% to 69% of new drug approvals.
other the study This is backed up by a 2023 study by researchers at Clarion Healthcare: Of the 50 breakthrough cancer drugs approved by the FDA between 2010 and 2020, only 14% were developed solely by big pharma. Big companies often play a different role, completing new drugs through acquisitions and licensing. The study found that big pharma launched or was involved in the launch of 76% of breakthrough cancer drugs in the past decade.
A new study suggests that the acquisition and licensing practice common in the industry could help large companies maintain profits even if their revenues fall by up to 10%. Using financial models, the researchers showed how large companies could target cost savings in their own early-stage trials while preserving their late-stage pipelines through drugs acquired from smaller companies.
“Innovation in the pharmaceutical industry cannot be fully explained by traditional economic theory, which does not take into account the unique business models of small, science-based biotechnology companies,” Fred Ledley, lead author of the study and director of the Center for Science and Industry Integration, said in a statement. “Our research suggests that established management and investment practices could maintain both industry profits and current levels of drug approvals, even in the face of the drug price cuts projected by the Inflation Control Act.”
The study’s model relies on a 10% revenue decline threshold, and estimates vary on how much revenue will ultimately decline, but Research suggests It probably won’t be that expensive.
U.S. Government I said last week The deal will save taxpayers $6 billion in list prices for 10 widely used prescription drugs.
But the price changes for those drugs, which include two popular blood thinners, several diabetes medications and cancer drugs, won’t take effect until 2026. And the biggest savings won’t be realized until around 2027, he said. New CMS Forecast.
