The Price of Innovation
January 22, 2020
Photo by Leslie Walker
The United States pays more for prescription drugs than any other country in the world. But whenever politicians propose lowering those prices, industry leaders claim it would harm innovation and the development of new breakthrough treatments. Can we lower prices and retain innovation?
Listen to the full episode below, read the transcript or scroll down for more information.
By the Numbers:
Drug Prices in the U.S.
By the Numbers:
Drug Development in the U.S.
1 in 10
odds of a drug making it from clinical trials to market³
The Evidence: The Relationship Between Drug Prices and Innovation
- Margaret E. Blume-Kohout and Neeraj Sood, Market Size and Innovation: Effects of Medicare Part D on Pharmaceutical Research and Development, Journal of Public Economics, 2013
- David Dranove, Craig Garthwaite and Manuel Hermosilla; Pharmaceutical Profits and the Social Value of Innovation; National Bureau of Economic Research; 2014
- PitchBook analysis
- Congressional Budget Office Analysis of H.R. 3, 2019
- House Drug Pricing Bill Could Keep 100 Lifesaving Drugs from American Patients, White House, 2019
The Tradeoffs: Price Regulation vs. Innovation
From Lab Bench to Bedside: How an Idea Becomes a Drug
At the core of the argument over how drug prices will impact innovation is the process of researching and developing new treatments. The graphic below demonstrates a common (though not universal) path that an idea must follow to become a prescription drug. Estimates of the cost of the complete process range from several hundred millions to billions of dollars, and many drug ideas fail at every step of the process.
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Drug Price-Innovation Relationship:
Pharmaceutical Profits and the Social Value of Innovation; David Dranove, Craig Garthwaite and Manuel Hermosilla; National Bureau of Economic Research; 2014
Market Size and Innovation: Effects of Medicare Part D on Pharmaceutical Research and Development, Margaret E. Blume-Kohout and Neeraj Sood, Journal of Public Economics, 2013
Role of Venture Capital in Drug Development
The Changing Landscape of Research and Development, IQVIA, 2019
U.S. Drug Prices Compared to Other Countries
“The True Story of America’s Sky-High Prescription Drug Prices,” Sarah Kliff, Vox, 2018
Paying for Prescription Drugs Around the World: Why Is the U.S. an Outlier? Dana O. Sarnak, David Squires and Shawn Bishop; The Commonwealth Fund; 2017
Guests: Chaitan Khosla, Director of Stanford ChEM-H
Craig Garthwaite, Associate Professor of Strategy, Kellogg School of Management at Northwestern University
Stacie Dusetzina, Associate Professor of Health Policy, Vanderbilt University
Original music composed by Ty Citerman; additional music by Blue Dot Sessions, Bacon and OnlyMeith
This episode was reported and produced by Ryan Levi and Victoria Stern. It was mixed by Ryan Levi.
Additional thanks to:
Rachel Sachs, Dan Paterson, Paul Hastings, Sarah Dykstra, Michelle Arkin, Michael Carrier, Nicholas Bagley, Richard Frank, Ariel Dora Stern, Brian Smokler, Bill Edwards, Kristen Samuelson, Paul Ruest, the Tradeoffs Advisory Board…
…and our stellar staff!