This could be the headline if the Pfizer acquisition of AstraZeneca comes to fruition.
Pharmaceutical companies continue to remind us that the reason they have to charge outrageously high prices for their drugs is because drug discovery and development is high risk and very expensive. This argument has always been suspect but now there is clear evidence that it isn’t the high risk and high cost of drug development that drives high drug prices.
Here are two examples that totally discredit the premise behind high drug prices being espoused by Big Pharma. Gilead spent $11 billion and Pfizer is contemplating an acquisition which will cost the company over $100 billion to buy a company. These acquisition costs represent more than 5 years’ worth of R & D spending by either company. Unfortunately, no new drugs will be coming from the money spent on these acquisitions. That’s right, no new drugs, not one, come from the money spent on these acquisitions. Sure the companies will continue to develop some of the compounds that are already in their respective pipelines, but the $11 and $100 billion isn’t going to discovering or developing any new treatments.
Unfortunately, rather than increasing drug discovery and development, these type acquisitions divert money away from drug research. In addition to the cash and stock value used in the acquisition, the acquiring company looks for “redundancy” and “operational synergies” which result in massive cuts in research budgets and staff. Bottom line? Billions of dollars spent for less research, fewer drug discoveries.
It is clear that drug companies don’t have to charge outrageously high prices to cover their R & D expenses. In the examples given here, patients are paying for the acquisitions. Drug companies obviously have more than enough cash to fund even more research than they currently do. Rather than innovative drug research, their high drug prices are supporting luxurious operating expenses, overpriced acquisitions, and extraordinary executive compensation (Gilead, Pfizer, and several other Big Pharma CEOs are among the top compensated CEOs in Corporate America).
Rationalizing the high prices they charge for medicine with the high cost of R & D is just another reason Big Pharma has lost all credibility with patients, regulators, and the healthcare market.