How Financing Affects Medicines R&D
ResearchPosted on rand.org Sep 10, 2025Published in: Formulating and Implementing Pharmaceutical Pricing Policies: Challenges, Case Studies and Lessons Learned from Medicine Price Control, Chapter 15, pages 261-273 (2025). DOI: 10.1016/B978-0-443-23518-4.00009-6
The financial system and investment decisions play a key role in determining what medicines are available. However, this system operates in the background and is often detached from conversations about improving outcomes (e.g., health outcomes, affordability, and access). Understanding the fundamentals of the financial ecosystem for medicines research and development can help identify opportunities to shift investment toward areas of need and create a system that produces better outcomes. This chapter introduces the major players in financing for medicines R&D and the motivations in decision-making about investment; explains the role of expected financial returns across the R&D process and what influences expected financial returns; and describes ways to influence investment when it does not align with what is needed in the healthcare system and society. It aims to provide a brief introduction to the financial system to inform ways the public sector can influence expected returns in order to attract investment to areas that are not adequately funded in the current system. The goal of this chapter is to provide a basic understanding of how financing for medicines R&D works, so that non-experts can be better equipped for conversations about how investment in R&D can better meet societal needs.
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