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US Securities and Exchange Commission

Democratic Bill Would Require Disclosure of Pharma R&D Expenditures

Bill Flook  Editor, Accounting and Compliance Alert

Bill Flook  Editor, Accounting and Compliance Alert

House and Senate Democrats on April 7, 2022, introduced legislation requiring publicly traded drug makers to make new disclosures around research and development costs, including for clinical trials broken out by phase.

The Pharmaceutical Research Transparency Act of 2022 is part of a broader package of bills targeting the pharmaceutical industry. Rep. Carolyn Maloney of New York introduced the House version (H.R. 7474), and Sen. Debbie Stabenow of Michigan introduced the bill in the Senate (S. 4037).

Among other provisions, the bill would amend the Securities Exchange Act of 1934 directing the SEC to issue rules requiring the disclosure in annual reports of total R&D expenditures on drugs that includes disaggregated basic research, pre-clinical research, Phase I, II, and III clinical investigations, and post-market studies or clinical trials.

Excluded from that expenditure calculation would be cost incurred in connection with licensing agreements or acquiring intellectual property; costs of mergers or acquisition; certain intangible costs; and the estimated cost of capital, according to the bill text.

The SEC under the bill would have one year following enactment to propose the rules, and two years after enactment to finalize them.

The bill follows a December 2021 report by the majority staff of the House Committee on Oversight and Reform, which Maloney chairs, that detailed how drug makers have “aggressively raised prices on existing drugs and set higher launch prices for new drugs, all while reaping vast profits from American patients and taxpayers.” The report, which followed a three-year investigation, attacked pharma pricing practices as “unsustainable, unjustified, and unfair to patients and taxpayers.”

“In my Committee’s investigation, we found that Big Pharma manipulates our health care system to suppress competition and increase profits,” Maloney said in a statement. “These three bills target Big Pharma’s manipulative practices in order to strengthen competition, promote innovation, and increase transparency into research and development costs—all of which will help make drugs more affordable.”

Also introduced alongside the Pharmaceutical Research Transparency Act of 2022 were the Discounted Drugs for Clinical Trials Act, giving researchers access to drugs and other products at a discount, and the Generic Substitution Non-Interference Act, which would bar drug companies from certain practices that impede generic competition.

 

This article originally appeared in the April 14, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.

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