Exploring the impacts of increasing cost transparency requirements in pharmaceutical R&D
Apr 6, 2023
A literature review of academic and policy papers shows that increasing the transparency of the research and development costs of new medicines is much discussed. We find that advocates expect that transparency would lead to greater trust in the pharmaceutical industry and 'fairer' prices, but others fear it would discourage investment in R&D and impose administrative costs. Evidence to support either set of views is lacking, however.
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The costs of researching and developing new medicines are large, with much uncertainty about how successful any new medicine in the R&D pipeline will be. Insights on the size and nature of R&D costs can affect views on how much it is reasonable to pay for a new medicine. Transparency in R&D costs is of public and policy interest. We reviewed the academic and grey literatures to discover what it says about the types of information published about the costs of R&D, the sources of cost data and how much transparency is achievable.
We found that transparency was generally not defined explicitly but information that could be made (more) transparent includes: direct R&D costs such as supplies and staff costs; indirect costs such as overhead expenses; R&D timelines needed to bring new drugs to market; the cost of capital for medicines R&D; the costs of abandoned projects; and information about attrition rates and public contributions to medicines R&D, such as indirect subsidies, incentives, tax credits and post-approval support.
The implications were greater transparency of R&D costs of individual medicines to be achieved, are currently unclear. Claimed advantages include 'fairer' prices, better investor decisions, better accountability and governance, and hence greater trust. Claimed disadvantages include that greater transparency might feed predatory behaviour by commercial rivals to research-based pharmaceutical companies, and impose administrative costs, both of which might damage the flow of new medicines. Evidence about the likely impact of greater transparency on medicines prices and innovation is lacking.
Background and context
Discussion and conclusions
All sources included in the literature review
Sources of estimates from the literature review
The research reported here was commissioned and funded by Merck Sharp & Dohme (Europe) Inc. and conducted by RAND Europe.
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