By law, Medicare will have to take a medication’s efficacy and its research and development costs into account when it starts to negotiate drug prices — but recent research shows pharma companies ignore those factors when they pick prices for their products.
Two recent studies aimed to quantify how much R&D costs impact a drug’s price, and how much a drug’s effectiveness correlates with its price — factors that might, in theory, help justify a sizable price tag. But neither factor has much effect, the studies concluded. Instead, as conventional wisdom suggests, a drug’s price is almost always simply what the market will bear.
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