Publicly Funded Drug Trials Will Counteract the Corruption and Inefficiency of Testing

Greater Transparency in Testing Process Would Lead to More Accurate Disclosure of Benefits and Hazards

For Immediate Release: March 11, 2008

Contact: Alan Barber, (202) 293-5380 x115

Washington, DC- Recent evidence of the negative side effects of prescription drugs such as Zyprexa have shaken the American public's faith in the effectiveness and safety of the drug testing process. A report released today by the Center for Economic and Policy Research  (CEPR) outlines a proposal for a new system of publicly financed clinical drug trials that could substantially reduce the inefficiency and conflicts of interests inherent in the current system of drug testing. The cost of the drug trials would be covered by reduced payments for prescriptions drugs under Medicare Part D and other government programs. The report presents calculations suggesting that a system that publicly funds private contractors to conduct the clinical trials of new prescription drugs would also lead to substantial savings for the government in addition to its public health benefits.

The report, "The Benefits and Savings from Publicly-Funded Clinical Trials of Prescription Drugs," argues that establishing a network of independent companies working on long-term federal contracts would eliminate the conflicts of interest in the current structure of the pharmaceutical industry. These conflicts of interest often prevent the full and accurate disclosure of the results of drug testing. Under the present system, the pharmaceutical companies have a strong incentive to exaggerate a drug's benefits and conceal potential dangers, as arguably happened with the arthritis drug, Vioxx. 

In order to ensure full disclosure of the results of these trials, the federal contracts for testers would require that all results be available to the public and posted on the internet. Public access to this data should eliminate needless duplication in the drug development process and also facilitate comparative assessments of like drugs. 

The report goes on to demonstrate that public funding can potentially save state and local governments in excess of $120 billion dollars over the course of 10 years. If comparable price reductions are applied to the private sector as well, the savings would total over $900 billion. 

"The cost of publicly funding trials would be more than offset by the savings from paying lower prices for prescription drugs purchased by having Medicare negotiate prices in much the same way that the U.S. Department of Veterans Affairs negotiates lower prices," according to Dean Baker, co-director of CEPR and author of the report. 

Other potential benefits include: 

  • Publicly funded trials may be conducted at a lower cost than industry sponsored trials since there would be no incentive for independent contractors to overpay participating physicians as a way to encourage them to prescribe the company's drugs.
  • Research could advance more quickly since all the results of the trials conducted through a publicly funded system would be immediately and fully disclosed allowing other researchers to benefit from this information.
  • Lower drug prices would substantially reduce the waste associated with efforts by insurers and other third party payers to restrict the use of high priced drugs.

The report, in its entirety, can be found here.


The Center for Economic and Policy Research is an independent, nonpartisan think tank that was established to promote democratic debate on the most important economic and social issues that affect people's lives. CEPR's Advisory Board of Economists includes Nobel Laureate economists Robert Solow and Joseph Stiglitz; Richard Freeman, Professor of Economics at Harvard University; and Eileen Appelbaum, Professor and Director of the Center for Women and Work at Rutgers University