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Drug research: public funding, private profits

Drug companies receive many direct and indirect forms of public aid for pharmaceutical research, but the allocation of this aid lacks transparency, and recipients are not required to market the drugs concerned at affordable prices.

Pharmaceutical companies often cite the high cost of research and development (R&D) to justify the astronomical prices they charge for new drugs. Companies do not, however, cover these R&D costs alone.

One-quarter of new pharmaceutical substances authorised in the US had their origins in public-sector research. Publicly funded basic research also plays a crucial role in drug discovery in Europe.

Tens of billions of euros of public money are invested worldwide in the R&D of new drugs. Pharmaceutical companies also benefit from billions in tax breaks through research tax credits. France’s tax credit covers 30% of research expenditure up to €100 million, and 5% above this threshold. It covers 60% of the cost to companies of outsourcing their R&D to academic research institutions. Income derived from the transfer of patent rights is taxed at the reduced rate of 10%.

However, the public receives little in return for this funding, judging by the increasing sums health systems devote to paying for outrageously expensive drugs.

In many countries, people are starting to speak out against the fact that the public pays twice for drugs: first by funding their R&D and a second time, by paying high prices for medicines through national health insurance systems. They are calling for transparency over public funding, and for such funding to be made conditional upon on easier and affordable access to these medicines.

©Prescrire 1 December 2020

Source: "Drug research: public funding, private profits" Prescrire International 2020; 29 (221): 303-306. Free.

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See also:

research: too opaque!"
(March 2019)

"Zolgensma°: the drug
of extremes"
(September 2020)

"New drugs: the key role
of publicly-funded research
in the United States"
Prescrire Int 2019;
28 (210): 306.
Pdf, free

"Pharmaceutical research
and development: Europe,
the WHO and the OECD
want a healthier balance"
Prescrire Int 2019;
28 (182): 132-133.
Pdf, subscribers only

"Transparent, independent
health authorities"
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