Five Fatal Flaws in Rep. Katie Porter’s Indictment of the U.S. Drug Industry - KEY TAKEAWAYS

▪ Contrary to the assertion that the government plays a key role in drug development, evidence suggests that the role of the large biopharma firm is central. [...] Actually, in 2016, the top 20 firms globally accounted for 66.5 percent of global sales yet made 64 percent of R&D investment.15 In 2018, the R&D intensity of the largest 4 firms was 26 percent, of the top 8 was 25 percent, and of the top 20 was 22 percent, with the entire industry at 20 percent.16 In reality, it is the largest firms, not the smallest, that are the most R&D intensive. [...] But as more drugs hit the market, the share of first-in-class drugs declined as it became harder to discover new treatments and also because of the importance of producing multiple drugs to address the same disease. [...] In a study of productivity, research economists Bloom, Jones, Van Reenen, and Web found that over the last 20 years, in many industries, including biopharmaceuticals, it takes more R&D effort to get the same results.47 This is reflected in a 2014 study by Tufts Center for the Study of Drug Development that estimates that the average cost of developing a new drug was $2.56 billion up from $1.1 bill. [...] Similarly, according to a 2018 report “Unlocking R&D Productivity: Measuring the Return From Pharmaceutical Innovation 2018” by the Deloitte Center for Health Solutions, “The average cost to develop an asset, including the cost of failure, has increased in six out of eight years.”49 The report estimates that the cost of developing a new drug almost doubled from an average cost of $1.19 billion in.