Academic Literature

Understanding the Rewards of Successful Drug Development: Thinking Inside the Box

The ability to charge high prices is only one component of a complex system of risks and rewards that underlies pharmaceutical innovation.

Authors

Originally published on 01/30/2020 in The New England Journal of Medicine

Current healthcare policy is focused on lowering drug prices. However, the ability to charge high prices is only one component of a complex system of risks and rewards that underlies pharmaceutical innovation in the US.

Policymakers who contemplate the system as a whole may create space for additional policy levers for change, since it is this overall framework that dictates the incentives for new drug development. In this paper, we introduce the idea of an "reward box" to summarize the financial returns across the phases of drug discovery, approval, and sales. The objective of this is to show how the drug development and sale periods interact to produce the overall reward.

Read the full article and see the interactive "reward box" graphic here.

Share

Authors

Research & Insights

We conduct non-partisan, independent research, and make our work accessible and informative to policymakers and the general audience alike. Browse our featured research or explore our work by article type.

Medicare Negotiation: A "Too Little" or "Too Late" Framework for…
Recent draft pieces of legislation and regulation take aim at the rising cost of drugs, targeting drugs that claim the largest share of the health care budget and that face limited competition from generics or biosimilars.
NEJM 11/28/2019
The Conflict Between QALYs and Well-Funded Patient Advocacy Groups
The goal of a QALY is to figure out how much any given drug is worth to a society so that we, as a society, have a benchmark to evaluate the price of pharmaceutical products.
Relentless Health Value 12/10/2020
Remdesivir Less Expensive for "Government Programs"? Not So Fast.
Two options are proposed if Gilead wishes to offer the discounts to the full array of government programs.
Drug Pricing Lab 07/01/2020
Blueprints for Indication-Specific Pricing
Several approaches that rewire existing reimbursement conventions as alternatives to facilitate ISP are proposed.
Drug Pricing Lab 05/19/2020
Pharmaceutical Products and Their Value
Steep increases in prices and spending on prescription drugs in the United States have triggered public outrage and questions about their value.
Value in Health 03/29/2020
Drop in Cancer Deaths Reflect Failures of Our Society. Really.
Despite declining cancer death rates, the nation still presents societal failures to improve the state of our population's health.
The Boston Globe 02/21/2020
Dissecting PhRMA's Opposition to H.R. 3 Lower Drug Costs Now…
Dr. Peter Bach responds to PhRMA's stance of opposition to H.R. 3 Lower Drug Costs Now Act of 2019.
STAT News 10/11/2019
Time to Throw in the Towel on Biosimilars
Peter Bach and Mark Trusheim of MIT Sloan School of Management underscore the drawbacks of Washington's preferred solution to introduce competition for biologics, the biosimilar model.
The Wall Street Journal 08/21/2019
Mortgaging New Treatments Kicks the Can on High Drug Prices
The launch price for one-time gene therapy Zolgensma presents various implications.
Morning Consult 07/09/2019
A $475,000 price tag for a new cancer drug: crazy…
Drug Pricing Lab op-ed in STAT News discusses indication-specific pricing of Kymriah.
STAT News 08/31/2017
US Drug Prices And R&D, Take 2: A Reply To…
To answer Health Affairs responses, Peter Bach and Nancy Yu point back to the research, emphasizing the original intent of the conservative R&D cost assumptions.
Health Affairs Blog 07/27/2017
Prevalence of Off-Label Use and Spending Among Patent-Protected Chemotherapies
The prevalence of off-label anticancer drug use is not well characterized.
JCO 02/19/2013

Featured News

See All News
PBS 09/19/2015

Is Profit or Innovation Driving the Rising Costs of Drugs?

After Turing Pharmaceuticals raised the price of a drug from $13 a pill to $750, two leading Democratic candidates for president are proposing big changes. On PBS NewsHour, Dr. Bach provides one view on the situation.
Read Article
Newsletter

Stay up to date on our work and news