Forbes December 8, 2019
Joshua Cohen

For decades, R&D spending on pharmaceuticals has gone up more or less in tandem with the list prices of prescription drugs. Pharmaceutical companies sometimes cite rising R&D expenditures to justify list prices of prescription drugs in the U.S.

It’s a truism that in order for pharmaceutical firms to be going concerns they must recoup costs, including R&D expenditures. It’s also a truism that if investors aren’t enticed by large returns for taking big risks with their money, the investment dollars to fund pharmaceutical R&D will diminish.

Additionally, variable production costs may play a role in determining drug prices. For large molecule biologics, for example, marginal production costs are relatively high, while for small molecule pharmaceuticals such costs are low.

Nevertheless,...

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