PhRMA Statement on GAO Report

PhRMA Statement on GAO Report

Washington, D.C. (January 11, 2010) – Pharmaceutical Research and Manufacturers of America (PhRMA) Senior Vice President Ken Johnson today released the following statement on a report issued by the U.S. Government Accountability Office (GAO):

“Unfortunately, the GAO report focuses only on a small number of selected brand medicines rather than the entire prescription drug market. When looking at recently released national health care spending data for 2008, there was a sharp decline in retail prescription drug spending growth, leaving medicines as one of the slower growing areas of health care expenditures.

“In fact, according to CMS, the 3.2 percent growth in prescription drug spending is the lowest growth rate in 47 years and well below the overall growth rate for health care.

“What’s more, in over half of the cases, according to GAO investigators, price increases were attributable to middlemen and 'appear to have originated from the company that repackaged the drug rather than the company that manufactured the drug.'

“Pharmaceutical research companies make price adjustments independently as a result of market forces, which include everything from patent expirations to the huge, sunk R&D costs which typically exceed $1 billion for a single medicine, as well as the ability of powerful purchasers to obtain large savings, benefiting patients.

“Today, prescription medicines account for only 10% of health care spending – the same as it was back in 1960. Unfortunately, medicines are always looked at as a cost and never seen as a savings, even though medicines often reduce unnecessary hospitalizations, help avoid costly medical procedures and increase productivity through better prevention and management of chronic diseases.

“Discovering and developing new medicines is an inherently risky and expensive business. Companies spend, on average, 10 to 15 years and $1.2 billion researching and developing just one innovative medicine. And for biologics, which represent the future of medicine, companies devote an additional $250 million-$450 million to build specialized R&D facilities.

“Most importantly, despite their small share of health costs – relative to other health services – medicines are yielding major health advances. For instance, prescription medicines have played a key role in the dramatic declines in death rates resulting from cancer, heart disease and HIV/AIDS in recent years. Clearly, innovation is the driving force behind medical progress.”


The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading pharmaceutical research and biotechnology companies, which are devoted to inventing medicines that allow patients to live longer, healthier, and more productive lives. PhRMA companies are leading the way in the search for new cures. PhRMA members alone invested an estimated $50.3 billion in 2008 in discovering and developing new medicines. Industry-wide research and investment reached a record $65.2 billion in 2008.

PhRMA Internet Address: www.phrma.org

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For information on how innovative medicines save lives, visit: www.innovation.org

For information on the Partnership for Prescription Assistance, visit: www.pparx.org

For more information on public health emergencies, visit: www.rxresponse.org

For information on the danger of imported drugs, visit: www.buysafedrugs.info

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