Over the past few months, PhRMA (Pharmaceutical Research and Manufacturers of America) has been trying to promote the industry’s efforts to develop lifesaving medicines through its “Go Boldly” campaign. But with pricing scandals continuing to raise their ugly heads – some of which involve its members – PhRMA has decided to shakeup its membership criteria. Henceforth, members must have a three-year average global R&D spend of 10 percent of sales or greater, and a three-year average global R&D spend of at least $200 million per year (1). Moreover, the “research associate” category of membership – which allowed smaller companies to join for reduced fees – has been eliminated entirely, meaning those 15 companies are no longer members.
Seven full PhRMA members also didn’t make the cut, having failed on one or both of the criteria:
- AMAG Pharmaceuticals, Leadiant Biosciences, Orexigen Therapeutics and The Medicines Company all had an R&D/sales ratio greater than 10 percent, but did not spend more than the minimum of $200 million per year on R&D.
- Mallinckrodt Pharmaceuticals met the minimum $200 million spend, but were below the 10 percent R&D to sales ratio.
- Horizon Pharma and Jazz Pharma didn’t meet either one of the new criteria.
Mallinckrodt actually resigned from PhRMA in April – though apparently not in anticipation of the new rules. Instead, the company claimed that the financial and time commitment required as a full PhRMA member outweighs its value to Mallinckrodt (2). Mallinckrodt has been involved in a number of pricing scandals – most recently, it was fined $100 million over a monopoly on a specialty drug (Athar) used to treat infantile spasms. The company is also facing a DEA investigation into some of its opioid sales practices.
One of the 15 associate members to be pushed out of PhRMA was Marathon pharmaceuticals, which recently drew congressional criticism after charging $89,000 for Emflaza. Marathon CEO, Jeff Aronin, sat on PhRMA’s board before the recent revision of the membership rules.
“By putting in place new membership criteria, the board is sending a clear message that being a member of PhRMA means being committed to doing the time-intensive, scientifically sound research it takes to bring bold new advances in treatments and cures to patients,” said Joaquin Duato, PhRMA Board Chairman and Worldwide Chairman, Pharmaceuticals, Johnson & Johnson, in a statement (1).
PhRMA also pointed out that most of its members invest significantly more in R&D than required by the new criteria. “On average, PhRMA members invest 20 percent of their revenue in R&D, and the biopharmaceutical sector as a whole accounts for 17 percent of all domestic R&D funded by US businesses – far more than the software (13 percent), automobile (5 percent) and aerospace (4 percent) industries.”
- PhRMA, “PhRMA Board of Directors Establishes New Membership Criteria”, (2017). Available at: onphr.ma/2pmWe9l. Last accessed May 11, 2017.
- The Wall Street Journal, “Mallinckrodt Leaves Pharmaceutical Trade Group Ahead of Potential Changes to Bylaws”, (2017). Available at: on.wsj.com/2r2XFq4. Last accessed May 11, 2017.
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