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New Rules at PhRMA to Change Industry's Image

The drug industry's main lobbying group is kicking out members that don't spend enough on developing new products.

According to new rules from the Pharmaceutical Research and Manufacturers of America that went into effect this week, in order to remain members, drug firms  will have to spend at least 10 percent of their sales on global research and development over three years. They will also need to spend at least $200 million per year on R&D.

“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, said in a statement posted on the trade group's website.

Once the new rules took effect, seven members lost their PhRMA membership because they didn't meet the new criteria, according to the Washington Examiner, while 15 other companies were dropped after the "associate" membership category was eliminated.

The rules change comes as pharma tries to rehabilitate its image as greedy profiteers of sickness and disease, spurred on by news reports of outrageous hikes — e.g. Mylan and Turing Pharmaceuticals, formerly run by the infamous Martin Shkreli — in drug prices. Even President Donald Trump, not exactly a foe of free market economics, has verbally upbraided the industry for its practices.

Drug companies have defended their prices by saying it can cost billions of dollars to develop a drug, without any guarantee of success. But detractors note that some firms have hiked the prices of some drugs after acquiring the rights to them, without performing any of the expensive R&D.