Drug industry claims it spends 5 times as much as it does on new drug research and development, report shows

Drug industry claims it spends 5 times as much as it does on new drug research and development, report shows
August 2001

WASHINGTON, D.C., July 23--The pharmaceutical industry spends about one-fifth of what it says it spends on the research and development (R&D) of new drugs, destroying the chief argument it uses against making prescription drugs affordable to middle and low-income seniors, a Public Citizen investigation has found.

The findings are contained in a Public Citizen report, "Rx R&D Myths: The Case Against the Drug Industry's R&D Scare Card."

The report reveals how major U.S. drug companies and their Washington lobby group, the Pharmaceutical Research and Manufacturers of America (PhRMA), have carried out a misleading campaign to scare policymakers and the public. PhRMA's central claim is that the industry needs extraordinary profits to fund "risky" and innovative research and development to discover new drugs. In fact, taxpayers are footing a significant portion of the R&D bill, which is much lower than the companies claim.

"This R&D scare card is built on myths and falsehoods that are maintained by the drug industry to block Medicare drug coverage and measures that would rein in skyrocketing drug costs," said Frank Clemente, director of Public Citizen's Congress Watch.

Public Citizen based the study on an extensive review of government and industry data and a report obtained through the Freedom of Information Act from the National Institutes of Health (NIH). Among the report's key findings:

The actual after-tax cash outlay--what drug companies really spend on R&D for each new drug (including failures)--is approximately $110 million (in year 2000 dollars.) This is in marked contrast with the $500 million figure PhRMA frequently touts.
The NIH document shows how crucial taxpayer-funded research is to the development of top-selling drugs. According to the NIH, U.S. taxpayer-funded scientists conducted at least 55 percent of the research projects that led to the discovery and development of the five top-selling drugs in 1995.
Public Citizen found that, at most, about 22 percent of the new drugs brought to market in the past two decades were innovative drugs that represented important therapeutic advances. Most new drugs were "me-too" or copycat drugs that have little or no therapeutic gain over existing drugs, undercutting the industry's claim that R&D expenses are used to discover new treatments for serious and life-threatening illnesses.

A second report issued today by Public Citizen, The Other Drug War: Big Pharma's 625 Washington Lobbyists, examines how the U.S. drug industry spent an unprecedented $262 million on political influence in the 1999-2000 election cycle. That includes $177 million on lobbying, $65 million on issue ads and $20 million on campaign contributions.

"The drug industry is stealing from us twice," Clemente said. "First it claims that it needs huge profits to develop new drugs, even while drug companies get hefty taxpayer subsidies. Second, the companies gouge taxpayers while spending millions from their profits to buy access to lawmakers and defeat pro-consumer prescription drug legislation."

Rep. Pete Stark (D-Calif.), the ranking Democrat on the House Ways and Means Health Subcommittee, added, "Not surprisingly, pharmaceutical companies have been deceiving Congress and the American public for years. I commend Public Citizen for exposing the industry's long-standing attempt to hide the truth about R&D spending."

Sen. Paul Wellstone (D-Minn.), said, "This well-documented Public Citizen report shows just how much the pharmaceutical industry exaggerates its commitment to research and development and focuses instead on the bottom line."

Added Rep. Tom Allen (D-Maine), "Millions of our seniors have paid taxes for decades and contributed to the development of new drugs. Now in their retirement, they pay the highest prices in the world for these drugs. . . . The public deserves better."

Public Citizen calls on Congress to pass a Medicare-run prescription drug benefit program with strong cost containment that guarantees affordable prices for middle and low-income seniors.

Copies of the reports can be found at http://www.citizen.org/congress/drugs/R&Dscarecard.html and http://www.citizen.org/congress/drugs/pharmadrugwar.html

Public Citizen is a nonprofit consumer advocacy organization based in Washington, D.C. For more information, visit www.citizen.org