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California’s Transparency Bill Misses the Mark

May 4, 2017
Under a pending bill in California, drug companies would be required to disclose confidential and sensitive business records and detailed data about drug development costs. This bill represents a degree of government intrusion into a free market industry that is without precedent.

Senate Bill 17 purports to address the legitimate concerns of many Californians about the affordability of prescription drugs, but in truth does nothing to tackle that problem. Instead, it creates a new one – a public policy environment hostile to drug investment.

The failing of this bill is that it does not recognize the well-established fact that profits from a handful of approved drugs must subsidize thousands of research failures. Ninety percent of all new drugs in development do not gain government approval. That is to say, the investment of time and money into a particular drug almost always comes to a dead end. Today, more than 70% of clinical trials are being conducted by small companies. Most of these cases do not have a product on the market and rely on investment to fund their research.

Proponents of this bill falsely claims that drug companies spend more on marketing than on R&D. These cherry-picked claims have been discredited. As whole, the pharmaceutical industry spent more on R&D than on all combined promotional marketing activities. It’s also an overlooked fact that this industry has the highest rate of R&D reinvestment of any sector, at 21.3%.

The biopharmaceutical industry welcomes an honest dialogue about the true costs of health care. Unfortunately, SB 17 causes more problems than it solves. Its passage would mean less innovation, less economic growth and less investment in our world-leading bioscience sector. It’s just bad medicine.