STORRS , Conn.– A new national survey conducted by University of Connecticut
researchers for UConn’s School of Business shows the majority of Americans
strongly support price control measures for pharmaceuticals (60 percent) and
also believe prescription drugs are priced unfairly (77 percent).
However, researchers also found a lack of economic understanding among those
surveyed. John Vernon, a professor of finance at UConn and one of the study’s
lead researchers says, the survey found that a majority of Americans do not understand
economic concepts as they relate to pharmaceutical patents and research and development
(R&D). This lack of knowledge plays an important role in the formation of the
core opinions on the drug issue, said Vernon.
“The failure of such a high proportion of Americans to understand the most
basic economic principles relating to this industry is troubling, but not terribly
surprising,” Vernon said. “If public opinion based on economic ignorance
leads to policy reforms, such as drug price controls, then public health in the U.S.
could be significantly harmed in the long run. There is a good reason why some 99
percent of all economists denounce price controls.”
The study’s main findings reveal a large number of Americans do not understand
the role of patents and intellectual property rights as a means to provide incentives
for pharmaceutical research. Without patents and intellectual property rights,
Vernon explains, “Firms would not undertake the long and costly research and
development required for new drugs. This is an economic reality. Similarly, drug
price controls would significantly diminish the incentives to discover and develop
new drugs. Economic theory and empirical research are unambiguous on this point,
but our survey shows the majority of Americans believe otherwise.”
Other results include:
- 55 percent of Americans believe that if the government were
to set price controls on drugs, firms would continue to invest the
same (or more) in R&D for new drugs.
- 39 percent of Americans believe firms would continue to undertake
new R&D even if patents were completely eliminated.
- 49 percent of Americans believe profits and prices would be
unfair and too high even if net cost savings to total healthcare
system are realized (for example, through reduced hospital stays
because of new drugs).
- 70 percent of Americans believe that pharmaceutical company
profits are too high. When told that drug companies earn about average
profits compared to other brand name companies of their size, that
number dropped to 54 percent.
According to Vernon, once a new drug has been brought to market the cost of
manufacturing it is quite small, but drug companies spend a great deal of time
and money getting to that point, by some accounts more than $800 million and 15
years per drug. Patents are awarded so firms can charge a price that enables
them to recoup the money invested and to earn a profit. Without a reasonable
return on investment, pharmaceutical R&D becomes an unattractive investment
and firms will do less of it or stop altogether, Vernon said.
“While there is an understandable need to help ensure Americans can afford
their prescriptions today, Americans need to recognize there is no ‘free lunch,’” said
Vernon. “Price controls today will certainly improve the affordability of today’s
medicines, but this will come at a significant cost: fewer new drugs in the future.”
For full tables
and poll results, visit: http://www.dpp.uconn.edu/ or call or e-mail Michael Kirk
at Michael.Kirk@uconn.edu or 860-486-0715.
The survey was conducted by the Center for Healthcare and Insurance
Studies at UConn’s School of Business and Chris Barnes of the
UConn Department of Public Policy, with data collection by the Center
for Survey Research & Analysis. It was based on a scientific
telephone survey of 1,006 American adults. Sampling error is
+/- 3percent at the 95 percent level of confidence. Interviews
were conducted between April 18 – May 3.