High Drug Prices Don’t Accelerate Innovation—Lower R&D Costs Do
<p><strong><em>The majority of new drug development now takes place at startups with little to no revenue.</em></strong> Contrary to the claim that raising prices on old drugs drives innovation, large incumbent pharmaceutical companies are rarely the discoverers of new drugs. Large companies have bureaucratic R&D processes, in which scientists have comparatively little incentive to innovate, whereas researchers at startups share more fully in the economic rewards of successful drug development. As a result, the majority of new drugs are now discovered and brought into human clinical trials by pre-commercial-stage companies funded by venture capital and hedge funds. In 2020, 60% of new drugs approved by the FDA were first brought to the clinic by early-stage, unprofitable companies.</p>
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