Sample Solution

Although costs have increased, the development of new drugs has seen a decline since the 1990s (True cost). The process of pharmaceutical development is long, costly, and uncertain. According to the Food and Drug Administration, the average cost of developing a new drug is $2.6 billion dollars (FDA). Approximately 50% of developed medications reach screening while a low 5% of medications are approved (FDA). With these risks, pharmaceutical companies have fixated on the promotion of their current drugs as opposed to the release of new medications.
However, pharmaceutical companies have long justified their pricing by defensively arguing that revenue goes towards the research and development of new medication. In a six year review (2011-2017) of thirteen of the large pharmaceutical companies, 17% of total revenue was spent on research and development with a staggering 60% spent on the marketing of their current products (True). Over the years, pharmaceutical companies have been able to allocate their profits towards their gains. After all, the pharmaceutical industry is a lucrative business that have thrived under the laxity of regulations and have figured out ways to further increase profit margins. As these problems have become more apparent, bills such as California’s drug transparency bill of 2017 have been enacted. This bill mandates these companies to provide 60 day warnings of greater than or equal to 16% price increases (Upenn). Although the idea behind this bill is a step towards better regulations, it has yet to be adapted on a national level.