Obamacare Tax on Drug Manufacturers Will Result in Fewer or More Costly Drugs

June 19, 2014

Part of the funding for Obamacare comes from a $2.3 billion per year tax on drug manufacturers. The tax is assessed based on the share of all drug sales for each company that specific year. The money to pay this tax will either come from higher drug prices passed on to consumers or will come from research and development budgets.

A recent report from the Pacific Research Institute gives an update on the huge cost to bring a new drug to market. Dr. Wayne Winegarden writes that the average cost of a new drug is $17.2 billion. This not only includes the research and development of that particular drug, but also accounts for the cost of every drug research project that fails and does not make it to market. In other words, included in that $17.2 billion is the financial risk a company must bear to manufacture one successful drug.

 Patent laws allow a company 11 1/2 years to recoupe its research expenses. The drug then goes "off patent" forcing the parent company to compete with generic manufactures.

Tragically, the Obamacare tax only adds to the already high drug manufacture cost. Patients can expect fewer innovative drugs, higher drug prices, or both.