Speaking Truth to Scour

  • by: |
  • 05/21/2015
Eli Lily's John Lechleiter tells it like it is. And as John Adams said, "Truth is a pesky thing,"

Debunking The Five Big Myths About 'Big Pharma'

If you are a regular reader of politically oriented commentaries on the pharmaceutical industry then you are familiar with, and perhaps even subscribe to, what I call “the Big Five”—myths about this industry that routinely poison debates, obscure genuine problems, and distort policy recommendations on health care. These myths have been all over the public arena again recently, and it’s time to confront them systematically.

Myth #1 Pharmaceutical companies exaggerate the costs of developing new medicines to justify high prices. In fact: The research and development (R&D) expenditures of this industry are staggering—and since they are matters of public record there is no way and no need to exaggerate them.

In the U.S., the member companies of the Pharmaceutical Research and Manufacturers of America (PhRMA) alone spent more than $51 billion on R&D in 2014. That total is based on the same audited financial statements that appear in our annual financial reports to shareholders. In my own company’s case our R&D spending last year was $4.7 billion. In fact, the pharmaceutical industry accounts for 21 percent of all R&D spending by all U.S. businesses—creating and sustaining hundreds of thousands of jobs while serving as a the engine of biomedical progress for the entire world. This level of investment is what is required today to bring forth new medicines.

Myth #2 Industry does not develop most new medicines; they come from government and university laboratories. In fact: Government and academic research contribute in essential ways to biomedical progress—but the complex and expensive process of turning insights on diseases and promising leads into approved treatments for patients occurs almost entirely in private industry.

A recent academic analysis helps to tease out the key distinctions. Looking at the patent applications of all of the drugs approved by the U.S. Food and Drug Administration (FDA) from 1988 to 2005, the study found that nearly half of the new drugs cited either a public-sector patent or a government publication in their patent applications—demonstrating that publically funded research often contributes indirectly to the discovery and development of new medicines. But fully 91 percent of the approved drugs themselves were patented in the private sector—demonstrating that they were substantially discovered and developed by private firms.

Myth #3 Prescription medicines are the main driver of health-care cost increases. In fact: Expenditures on prescription medicines have been a stable component of health-care spending over time and often contribute to overall cost savings rather than to increases.

Only about 10 cents of every U.S. health-care dollar is spent on retail prescription medicines—which is the same share that was spent on prescriptions in 1960. While the overall use of medicines to treat many diseases has increased dramatically in that same period of time—and average life expectancy at birth in the U.S. has increased by more than nine years—the share of spending accounted for by prescription medicines is the same as it was 55 years ago. That comparison makes pretty clear that medicines are delivering value to the system rather than driving unsustainable cost increases.

A study published in the journal Health Affairs provides a good example of how this has worked. The researchers compared total medical expenditures for patients with four major diseases who faithfully used the medicines prescribed by their doctors versus those who did not. The “adherent” patients incurred somewhat higher prescription-drug costs, of course, but savings in their overall health-care expenses exceeded the extra drug costs by wide margins.

The fact that nearly nine out of 10 U.S. prescriptions are filled with generic medicines (which originated in the innovator sector, by the way) also has a lot to do with the overall stability of drug costs. The impact of generics has been especially positive for senior citizens and the programs that insure them. Looking at the top 10 prescription classes by volume used by Medicare Part D beneficiaries, the average daily cost of these therapies declined from $1.50 in 2006 to well under a dollar in 2013, and is headed much lower still.


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

Blog Roll

Alliance for Patient Access Alternative Health Practice
Better Health
Biotech Blog
CA Medicine man
Cafe Pharma
Campaign for Modern Medicines
Carlat Psychiatry Blog
Clinical Psychology and Psychiatry: A Closer Look
Conservative's Forum
Club For Growth
Diabetes Mine
Disruptive Women
Doctors For Patient Care
Dr. Gov
Drug Channels
DTC Perspectives
Envisioning 2.0
FDA Law Blog
Fierce Pharma
Fresh Air Fund
Furious Seasons
Gel Health News
Hands Off My Health
Health Business Blog
Health Care BS
Health Care for All
Healthy Skepticism
Hooked: Ethics, Medicine, and Pharma
Hugh Hewitt
In the Pipeline
In Vivo
Internet Drug News
Jaz'd Healthcare
Jaz'd Pharmaceutical Industry
Jim Edwards' NRx
Kaus Files
Laffer Health Care Report
Little Green Footballs
Med Buzz
Media Research Center
More than Medicine
National Review
Neuroethics & Law
Nurses For Reform
Nurses For Reform Blog
Opinion Journal
Orange Book
Peter Rost
Pharm Aid
Pharma Blog Review
Pharma Blogsphere
Pharma Marketing Blog
Pharmacology Corner
Pharmaceutical Business Review
Piper Report
Prescription for a Cure
Public Plan Facts
Real Clear Politics
Shark Report
Shearlings Got Plowed
Taking Back America
Terra Sigillata
The Cycle
The Catalyst
The Lonely Conservative
Town Hall
Washington Monthly
World of DTC Marketing
WSJ Health Blog