Do High Drug Prices Sustain Innovation?


John LatMattina describes a debate between himself and Dr. Bach on the sustainment of pricing in relation to research and development for pharmaceutical drugs.

LatMattina argues that revenues from new drugs result in innovation, as pharmaceutical companies invest almost 15% of earning into research and development. Therefore, new drugs need to be priced high, in order for pharmaceutical companies to gain a return on their investment.

On the other hand, Dr. Bach argues that there are drugs, such as aspirin and antibiotics, which are essential to some patients’ daily lives. Dr. Bach then counters asking if these drugs should be priced highly since they are a daily necessity.

LatMattina responds to this counter by arguing that aspirin and old antibiotics cost pennies a day because they lose patent protection with 10-15 years. Therefore, pharmaceutical companies need to charge a justified price when their drug initially hits the market, in order to give the company enough return to continue to invest in innovation.

LatMattina concludes his argument by claiming that high return on investment is what motivated pharmaceutical companies to pour money into research and development in the first place. Pharmaceutical companies need to have a profit in order to continue investing in the innovation of new drugs.

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