Big Pharma claims clinical trial costs are the reason for sky-high drug prices without any proof

Greater transparency of clinical trial costs will quantify the amount of public taxpayer dollars invested in new drug innovation. One main reason drug companies say drug prices are so high is because of the high cost of innovation. But who's really footing the bill of drug research in the U.S.?

prescription bottle spilled over with pills on an orange table

(co-author: Jazmin Winston, health care campaigns intern, Spring 2022)

Headlines confirm over and over again what Americans already know: prices of prescription drugs are high and increase every year. This is particularly troubling when two-thirds of American adults take prescription drugs and one-in-four Americans struggle to pay for them.  

Pharmaceutical companies defend their high prices by pointing to the “costs” of innovation in developing new medications. They insist they need those high prices to recoup the great risk they take in researching new therapies. But how much are they really spending on research and clinical trials to prove their new drugs’ effectiveness? It’s hard to say because they don’t disclose that price tag in any detail – even when public tax dollars are footing the bill.  

What we do know is that U.S. tax dollars funded every newly approved pharmaceutical from 2010 to 2019. Most early stage research for new drug development is taxpayer-funded – primarily through the National Institutes of Health (NIH) – or paid for by philanthropists. After initial discovery, drugs go through preclinical trial research to assure safety, followed by clinical trials necessary to gain Food and Drug Administration (FDA) approval. Public sector funding not only supports the basic research needed to innovate, but it also often continues to play a significant role in these later stages, which pharmaceutical companies claim are so expensive as to justify astronomical drug prices. 

It’s time that the public knows exactly how our tax dollars are being spent to bring new drugs to market so we can call out unfair prices set by drug companies. We and others recently asked the U.S. Department of Health & Human Services (HHS) and its agency, NIH, to provide detailed cost disclosures of all clinical trials that the government funds or conducts. 

Our letter explained: “The prevailing model of biomedical discovery, development, and delivery fails to control exorbitant prices…despite the significant public investment made to bring these health technologies into being. This happens, in large part, because pharmaceutical and biotechnology companies are able to claim that the high costs of research and development (R&D), clinical trials in particular, justify high prices for drugs…yet they do not disclose these costs in any detail. What limited information is available indicates that R&D expenditures are far outpaced by revenues.”

NIH responded that they “continually seek ways to maximize transparency.” But disappointingly, the agency gave no indication that they would take action to make public the disaggregated research costs we asked for and need. 

As a major funder, NIH and HHS is in a position to shed much needed light on clinical trial costs. As the steward of public resources, they owe us at least this much transparency and accountability. No public funds are returned by pharmaceutical companies to the government in exchange for all of the taxpayer investment during innovation and research. Rather, those companies have the benefit of years of high pricing and exclusive sales rights during the drugs’ patent lives.

The United States also already agreed to a World Health Assembly resolution committing us to take steps to make available the costs of clinical trials to better understand the source of high drug costs and increase accessibility across the globe. In other words, America has a global duty to increase our trial cost transparency. 

To best evaluate the claims that our high drug prices are the result of large research expenses, it’s more than reasonable to secure greater transparency about what innovation really costs. The NIH recently lost its director Francis Collins who served for 12 years. In nominating new leadership, President Joe Biden has the opportunity to bring NIH closer to its mission to “exemplify and promote the highest level of scientific integrity, public accountability, and social responsibility in the conduct of science.” The first step for any new NIH director is to pull back the curtain and give the public greater ability to assess the unproven claims that high drug costs are justified to pay for private investment in innovation.


Photo Credit – Christina Victoria Craft on Unsplash 


Patricia Kelmar

Senior Director, Health Care Campaigns, U.S. PIRG Education Fund

Patricia directs the health care campaign work for U.S. PIRG and provides support to our state offices for state-based health initiatives. Her prior roles include senior policy advisor at NJ Health Care Quality Institute, associate state director at AARP New Jersey and consumer advocate at NJPIRG. She was appointed to the Ground Ambulance and Patient Billing Advisory Committee in 2022 and works with patient advocates across the U.S. Patricia enjoys walking along the Potomac River and sharing her love of books with friends and family around the world.