Research & Development

Let’s talk about drug prices.

Years ago, I was persuaded by arguments from friends who worked at Eli Lilly, Indianapolis’ own “big Pharma” company, who explained the considerable expense entailed by the development of new drugs–including losses incurred when, after the expenditure of millions of dollars, efforts to produce a new medication failed–the drug ended up being shelved. If the government imposed caps on what could be charged for the medications that did emerge, there would be little incentive to spend the zillions necessary, and we would all suffer.

That seemed reasonable, because I didn’t understand how the production of these medications actually worked, and what profits were actually incentivizing.

What initially triggered my deeper investigation was the overwhelming amount of advertising by big Pharma. (Take the purple pill!!) Companies were spending enormous amounts to “incentivize” patients to demand prescriptions from their doctors. (I don’t know about other doctors, but mine absolutely hated these ads, which required him to explain to his patients why pill X or elixir Y was inappropriate for them.)

My preliminary research (granted, a few years ago) revealed that big Pharma was spending more on advertising than on research and development.

Then there was the data showing how much those companies spent on lobbying…

Then there were the reports showing that efforts to produce new medications seldom if ever addressed so-called “orphan” maladies–that is, severe illnesses from which relatively few people suffer–since the markets weren’t attractive. They did spend generously, however, to produce slightly different versions of already-successful products.

But the most revelatory information came when I joined academia and kibitzed with colleagues on the medical faculty. Until then, I hadn’t realized how much pharmaceutical research and development is funded by government. Taxpayers pay, and drug companies profit.

A recent report from highlighted an example from the recent COVID pandemic.

Moderna, the world’s hottest new Big Pharma giant, now has four of its top players sitting on the annual Forbes list of America’s 400 richest. In early 2020, Moderna had none.

Moderna’s Forbes 400 billionaire quartet owes its current good fortune completely to the company’s Covid-19 vaccine. And who made that vaccine possible? U.S. taxpayers. Moderna’s Covid vaccine, as Public Citizen research director Zain Rivzi puts it, “would not exist without the massive contribution of the federal government at every step of the way.”

The Biden administration’s chief science officer for the Covid response, David Kessler, calculates that the federal tax dollars handed to Moderna for vaccine development, testing, and initial manufacture total about $10 billion. And that figure doesn’t include the brainpower of the scientists at the U.S. National Institutes of Health who spent four years actively collaborating with Moderna’s researchers.

Moderna has now filed for a patent on the key vaccine breakthrough these scientists helped produce. The company’s patent application makes no mention of the NIH scientists, a snub that could, notes a Wired analysis, have “major ramifications.”

What are those ramifications? Well, evidently, if a patent gives federal scientists the credit they deserve, the government can license the technology for Moderna’s vaccine to developing countries where vaccination rates remain low.

But if Moderna gets its way — gets approval for a crucial patent that denies credit to federal NIH scientists — the company’s billionaires would have “sole control” over the Covid vaccine technology that U.S. scientists and tax dollars did so much to create. That control would enable Moderna to continue placing profits ahead of people. Way ahead of people.

Over the course of this year’s first six months alone, Michael Hiltzik of the Los Angeles Times points out, Moderna “pocketed $4 billion in profits on $5.9 billion in revenue, almost entirely from its Covid vaccine, its only product.”

Meanwhile, according to the Mayo Clinic, the most commonly used forms of insulin cost 10 times more in the United States than in any other developed country. Other medications Americans rely upon to survive are also disproportionately expensive here.

According to the Commonwealth Fund

Drug spending in the United States is at an all-time high and still rising. Studies have repeatedly shown that the U.S. pays far more for the same prescription drugs than other high- and middle-income countries. Patients in the U.S. are more likely to report that they can’t afford their medications; half of all of adults with lower incomes go without care because of cost.

Commonwealth also debunks that argument that once seemed reasonable, opining that it “is an overreaction to say that any efforts to address drug pricing will stifle innovation,” since–among other things–the pharmaceutical industry has the largest profit margins of any sector among publicly traded companies.

And since U.S. taxpayers will continue to bear a substantial portion of R & D costs.


  1. Yes, that is how the US version of capitalism works – we socialize the costs and privatize the profits. What’s even more sinister, we also produce the demand for the healthcare and pharmaceutical industries.

    It goes much deeper than that even. Think cancer research and medical device makers. Think about all the diseases our pollution creates which allows the healthcare industry to derive profits. Most, if not all, diseases are preventable.

    Could you imagine if our universities and government working on disease prevention instead of assisting oligarchs in becoming wealthy?

    Even more sinister and corrupt – what if our oligarchs and government colluded to create demand for specific products?

    And, why on earth would our free press (media) expose these devious criminal plans if they get those one-page ads from oligarchs? 😉

    Why they wouldn’t, would they? LOL


  2. I wonder which of our federal Congress persons are on the payroll for Moderna, Pfizer, etc? I know that Senator Cinema is receiving funding from Big Pharma, but she certainly is not the only one.
    As long as profit remains the driving force in the Medical/Industrial Complex our so-called health system will remain low on the list of developed nations.

  3. Harvoni, the actual miracle drug for Hepatitis C, cost patients $1,152. plus change PER PILL. When my daughter suffered her 4th or 5th near death episode Eskenazi Hospital found someone to cover her $700 PER PILL co-pay and saved her life. By then, the permanent damage caused by Hep C has left her with a shortened life expectancy.

    We cannot put a price tag on the lives of loved ones, or anyone, but a friend researched production of Harvoni and found it cost Big Pharma $17 per pill to manufacture the drug. No idea if research and development was figured into the production cost but…when the cost is beyond the possibility of victims ability to pay, even with health care coverage, there appears to be no waste cost factored in the manufacture of some drugs on the market. Greed can be the only answer in too many cases of cost vs. access to life saving drugs in this country.

  4. Nothing new here. Read about the nearly single-handed effort by one pharma lobbyist who got Medicare Part D enacted during the G.W. Bush Administration.

    And more recently, our Medicare premiums jumped significantly this year. I read an account where nearly half the increase is to help fund senior prescription costs for the new Alzheimer’s drug Aduhelm, made by Biogen. The FDA conditionally approval it in June, even though an advisory panel had recommended against allowing the drug on the market due to its high cost and questionable efficacy.

    We are not living in a capitalist democratic republic. We live in a crony-capitalist oligarchy. And it’s always been that since well before the nation’s founding.

  5. Dean Baker, an economist with CEPR (The Center for Economic Policy and Research), has been following this issue for years. His book (Rigged) is free.

    He explains other ways of financing drug R&D that would lead to greater progress at half the cost and save many lives both hear and around the world. This is just another example of crony capitalism that moves $ up the economic ladder.

  6. Todd is correct on all fronts today. While researching my book, “Killing the Dream: America’s Flirtation With Third-World Status”, I came across a quote from the president of Abbott Labs. He said that they weren’t in business to save lives. They were in business to make money.

    I used to work for a Eli Lily subsidiary in San Diego. We built the first IV pumps and controllers as well as pioneering the electronic thermometers (Yes, I’m that old.). I spoke with some corporate types while presenting a capital project and he told me – off the record – that the R & D costs were minimal, because they got a better tax avoidance situation with advertising dollars.

    Cynical? You bet. It’s capitalism run amok, and the cost accountants could give a damn less about our health or the cures. Their basic premise is: Let’s see how much you’ll pay to live a little longer or hurt a little less. They are not at all interested in a healthy society. If we all lost weight, stopped excessive alcohol consumption, stopped smoking or chewing tobacco, and exercised responsibly, they’d lose stockholders and profits.

    We’re on our own, folks. Big Pharma only wants your money.

  7. Not mentioned by anyone yet is the legislation that prevents Medicare from directly negotiating with pharmas and biotechs for lower drug prices, which is IMO, corruption writing into law. This affects the elderly far more than any other group in the community. In contrast, the Veterans Administration can negotiate and their prices are lower.

  8. Just an fyi, the only research that is paid for entirely by the pharma companies is the phase 4 research. That is all marketing research, done to compare the company’s newest drug to other drugs on the market, either alone or in concert with another existing and highly profitable drug.

    Uncle Eli has kept his profit margins on insulin high, by making miniscule changes to the formulation and applying for a new patent every time. If you want to continue taking the old formula, you’re just out of luck and out of pocket.

    I’m certain that, even though big pharma has a giant convention every year, there could not possibly be any collusion (which I read in a book called the “Mueller Report” is not a term of art under law) on pricing or delivery. And if we want to look at misleading advertising, let’s look at the commercial featuring Dorothy who has Lupus and apparently can easily afford the high priced drugs she takes for it and warns that in other countries they don’t have access to these lifesaving drugs that we have here in the good old US of profit.

  9. I recently read that American companies (not just drug companies) get a bigger payback, not by investing in R&D, but by investing in lobbying! Avoiding governmental imposed regulations has a bigger boost on the bottom line than actually growing the business.

    The drug industry apparently has lobbyists good enough to actually get the government to pay for the R&D.

  10. All countries in the world today have mixed economies allowing the government to choose which markets are appropriate for capitalism and which are better served by socialism. (Some are also democracies that allow the people who own the socialist means of production, we the people, to choose who governs.)

    Generally, the economic decision is informed by how well the market for a given good or service utilizes competition to manage corporations to serve on our behalf rather than we serving on their behalf. In an ideal capitalist market, they fight among themselves with the winners being who serves us best and the losers being ejected from that market. There is no news being reported here.

    Unfortunately for the US, while we have both a mixed economy and a democracy, we have screwed up how we finance the process of politics which should aid us in choosing who governs but in reality misinforms us by overwhelming what should be education with expensive advertising largely paid for by corporations who also use the process to buy politicians.

    Thus we are largely unable to make good decisions on which markets we should own the means of production in.

  11. Oh Sheila! God forbid we allow elected officials of political parties have any say in which candidates should receive public campaign funding and how much. That would give them too much power. Better we let corporate lobbyists pay ‘our’ elected officials campaign expenses. What could go wrong? If you have a better way to get BigMoney out of America’s politics, let’s hear it.

  12. I’ve felt for many years that drug companies, Big Pharma spend much more on marketing than on research. I had not thought about the cost of lobbying. In some ways lobbying is another form of marketing.

    Todd and Vernon are echoing what I have said before that if we Americans focused more on prevention of disease, we could markedly reduce our health care costs. It takes a lot of discipline and effort to stay healthy. i.e. don’t eat that sugar loaded dessert, don’t just sit on the couch, go take a walk!! Nicotine is just as addictive as cocaine. The co-founders of AA both died from medical diseases due to their smoking.

    What is really appalling to me is how some Big Pharma companies made huge profits by pushing opiates into the health care system. That all started when the president of JACHO decided to make pain the fifth vital sign. The over prescribing of opiates has markedly contributed to the marked increases in death by overdose in this country. And, of course, they took advantage of rural communities whose economies have failed to thrive due to the loss of manufacturing jobs and agribusiness. The Sacklers were just “legal” drug dealers

    I am certain that Big Pharma will get involved with the innovations created by the discovery of the genome i.e. crisper. I wonder how much those products will cost us.

  13. If only the Democrats had the WH,House of Representatives and the Senate,they could change this egregious situation.

  14. Anecdote 1 – When in graduate school in the ’70s, there was a “drug fair” where the pharmaceutical firms came on campus to explain their products. When I told them I was a graduate student, they handed me brochures on there latest dugs. On a lark, I said I was a first year medical student. They reached under the tables to give me playing cards, pens, notepads, and other swag, apologizing that they were now prohibited from giving better gifts like they used to do. I was told that Lilly had provided leather “doctor’s bags” in the past.

    Anecdote 2 – When I was working at the NIMH in the late ’70s, our lab chief started each year reminding us that our job was to research what the pharmaceutical companies thought was too risky and if we proved it to be a good bet as a therapeutic agent, we were supposed to step back and be happy that we had published some papers.

    Anecdote 3 – Working a Loyola Medical Center/Hines VA, the head neurology resident was telling me about the free trip to some island for a “conference” paid for by a drug company.

    Anecdote 4 – Asking my doctor here in Indy about a Pneumonia vaccine a couple of years ago. His response – “Which one do you want, the highly advertised one, or the one that is more effective.”

    Peggy already mentioned the add about how we will all be dying in the streets without medicines if we actually allow for negotiated drug prices.

    Insulin – no patent taken out; monoclonal antibodies – no patent taken out (but that may have been due to a snafu) — note the number of new pharmaceuticals that end in “mab”.
    PCR – a technique – patented –

    Anecdote 5 – I was called for an interview for a job (a former lab tech (assistant) put in my name – I had no idea what it was about) – It was for cancer research. When asked about ideas for lines of research, I responded with some involving PCR, then then hottest new technique. I was told that while Cetus (then the patent owner) allowed basic research and some disease research, they reserved all work on cancer for themselves. We couldn’t use that technique. Heaven forbid many lines of research that might save lives; the money was more important.

    I keep thinking of the gulls in the movie “Finding Nemo” — MINE, MINE, MINE

  15. Marsha Angell ,past editor of the,nEJM editorialized this at least 25 years ago.Shortly after she lost her job! The discoverers of the Polio Vaccine,Salk and Sabin gave the drug to thevWHO and never made a dime from their work! Estimated lives saved in the millions!

Comments are closed.