Reimagining Medicine

Could “Public Pharma” Save Us Trillions?

Across the world, governments and individuals spend trillions of dollars every year on medicines and medical devices. Much of this spending flows to a relatively small number of private pharmaceutical companies. These firms often justify high prices for drugs, which harm economies and restrict usage among needy patients, on the basis of costly research and development (R&D). But what if governments, who already fund large portions of medical science, invested directly in drug development and retained ownership of the results? Would we be economically and medically better off?

Using comprehensive 2024 global data, this article compares how much is spent on pharmaceutical R&D with how much is spent on buying the products directly. The results reveal a stunning imbalance and a massive opportunity for cost-saving reform.

Global Spending on Pharma R&D versus Global Spending on Medicines

In 2024, global pharmaceutical and biotech R&D spending reached a new high of approximately $288 billion, according to Evaluate Pharma.

This is backed up by earlier analysis from the likes of Deloitte, who estimated that the top 20 pharma companies spent $145 billion on R&D in 2022–2023.

Estimates of global pharmaceutical sales suggest the total annual spend on medicines is now over $1.6 trillion.

In fact, the U.S. alone spent $487 billion on retail prescription drugs in 2024.

What Other Costs are Involved?

The COGS (cost of goods sold) for pharmaceutical companies includes the actual cost to manufacture (materials, staffing, etc) and supply drugs to the market. These costs would still be payable even if governments researched and manufactured drugs themselves. Experts suggest this is usually around 25.7% of revenue. If we apply this to the revenues in 2024, for comparison, the total COGS would have been approximately $411.2 billion.

When combined with R+D costs, assuming there would be no savings in publicly operating R+D at all – ie, from sharing knowledge, reduced duplication, coordinated trials and shared trade secrets among the public institutions doing the research – the actual costs of running the entire drug industry (research, manufacture and supply of drugs) would be $699.2 billion.

When we consider the total current spend globally on drugs is $1.6 trillion, the cost to do this all publicly would be less than half (43.7%, to be precise).

Where does the rest of the money go now?

So roughly 43.7% covers research and development of new drugs, plus the cost of actually making and supplying the drugs themselves. The rest is spent variously on marketing/sales, business administration, lobbying and the remainder is profit.

Lobbying and profit are both, as common sense dictates, immediately unnecessary if companies are publicly run. Administration costs, likewise, pretty much disappear: remember, the COGS figure is the cost to produce and supply a drug. This includes ordering drugs, driving the raw materials and goods around, etc. The remaining administration costs are those not involved in the drugs or research themselves as these are included in those figures. Instead they are things like business development, sales, shareholder liaising, and generally all the things a big business needs to house in massive office complexes to keep a global business running.

Finally, marketing is equally redundant if we move to a public model. There will be minor costs for communicating developments to government, or parts of the government public health spend that need to be directed toward marketing new breakthroughs, so as to make them successful. But marketing in and of itself – particularly in big countries where pharmaceutical companies currently compete for the same disease markets with different drugs – would be redundant.

What Could Public R&D Change? The further benefits.

The major point to take away so far is that the way we do things, on a market basis, is hugely expensive. More than twice as expensive than if we just did things publicly. It makes a strong case that drugs are not done well by markets. But this isn’t even the whole story.

Public institutions like the NIH (USA), UKRI (UK), and Horizon Europe already fund a significant portion of early-stage biomedical research. But they typically hand off promising leads to the private sector for costly commercial development. In essence, the numbers we’ve already discussed as savings are likely even higher, as we already foot some of the research bill ourselves.

What about more practical benefits to governments taking over? There are plenty.

It would make drugs more widely available for poorer patients, regardless of the healthcare system in the country, by lowering global drug costs significantly. This is particularly true of more modern drug breakthroughs, which countries spend tens or hundreds of thousands of dollars per treatment of, and thus difficult decisions are made to withhold it for lower income or universal application in the system.

A public system would also greatly increase drug innovation by removing patent barriers. Currently, if one firm develops a breakthrough drug or treatment, that treatment is limited to use by the company who developed it. By allowing knowledge, research and medicine to be open-sourced widely, it’s the equivalent of allowing all laboratories across the country (and, ideally, across international cooperations) the chance to improve upon it. The current system leads to monopolies within certain treatments and is terrible for innovation.

There could also be a focus on neglected or unprofitable diseases, by allowing R+D to focus on whole society costs/solutions rather than those which are only pharmaceutically profitable. These are not only rare diseases which people might not suffer from in great enough numbers for pharma companies to focus on, but also those which cost the government a great deal of money in areas outside of healthcare.

Degenerative diseases, for example, in areas such as Motor Neuron Disease (called ALS in the US). These relatively few patients, who have short-life spans once diagnosed, also seem to encompass a variety of different versions of neuro-degeneration such that even existing medical breakthroughs have only helped with some subsets of patients.

The risks of spending on development from pharma companies on diseases like this has thus been prohibitive. Yet each of these patients usually require substantial levels of social care, consisting of most patients eventually needing care for full paralysis. It is not profitable for pharma companies to spend billions on developing drugs that slow down or help with symptoms, but for patients and the government it is a costly disease to deal with. Joining up these cost concerns in a public system would allow for more rational decisions.

This joined up thinking also allows for better research into non-patentable treatments. There is currently no market reason for pharmaceutical companies to fund any medical research into widely available products, or naturally occurring compounds, as treatments for any disease. Because these substances cannot be patented in their unaltered form, any investment into their clinical testing is commercially irrational.

This leads to systemic under-investment in interventions that might be highly beneficial yet cheap to make, especially in prevention or early-stage treatment. For instance, time-restricted eating and other forms of intermittent fasting have shown promise in improving insulin sensitivity, reducing inflammation, and even delaying the onset of chronic diseases like type 2 diabetes, but trials remain small and inconsistent, because no company stands to profit from proving them conclusively effective.

Similarly, compounds like berberine, a plant alkaloid found in barberry and goldenseal, have demonstrated glucose-lowering effects comparable to metformin in some studies, yet funding for large-scale, long-term trials is lacking. Another example is niacin (vitamin B3), which showed cardiovascular benefits but fell out of favor after proprietary extended-release versions were withdrawn, leaving no incentive to test or promote generic forms. These examples underscore a disastrous blind spot: treatments that are low-cost, widely available, and potentially transformative should be our major focus, but are completely prohibitive under a market model.

Finally there is the ‘publishing all-trials’ affect. Private pharmaceutical companies have strong incentives to bury or downplay negative trial results, especially when they threaten the marketability of a new drug. This leads to publication bias, where only successful trials see the light of day, distorting the scientific record and leading to widespread misperceptions about efficacy or safety. According to the AllTrials campaign — a global initiative for clinical trial transparency — around half of all clinical trials are never published, and many that are published omit key outcome data or methodological details. This isn't just inefficient; it can be dangerous, leading doctors to make decisions based on incomplete or biased evidence.

In a public system, however, there is no financial motive to suppress results. All research findings, whether positive, negative, or inconclusive, could be made openly available by default, improving meta-analyses, preventing redundant or unsafe trials, and vastly accelerating scientific understanding. It also allows failures to be genuinely instructive: if a treatment proves ineffective, researchers across the globe can see why and build upon that knowledge, rather than repeating the same dead ends in silos. This open-science model, already embraced in areas like pandemic response and climate science, could transform pharmaceutical R&D into a global collaborative effort, rather than a fragmented race for proprietary advantage.

A Smarter System is Possible

Global pharmaceutical innovation is essential. But the current model is wildly inefficient and flawed:

· $1.6 trillion is spent yearly, yet only 43% of this actually buys or develops drugs.

· The drugs and treatments we most need – those cheap and widely available options – are minimised in favour of expensive, patentable drugs.

· Our scientific understanding is hampered by proprietary secrecy.

· The poorest patients, who we spend the most money caring for in ill health, are least likely to benefit from modern breakthroughs.

The pharmaceutical industry in its current evolution is not working well; it’s an industry where the market is not best-placed to create efficiencies. Spending that £1.6 trillion directly on public innovation would more than double the amount we could actually spend on drugs and research, as well as creating a variety of important benefits. Not to mention making medicines more universally available to those who need it.

There are many areas where the global environment is calling out for international collaboration to create a more rational and efficient world. Not least the financial system, which is quickly running out of road. Perhaps an international collaboration on buying out pharmaceutical companies and aiming toward more rational and cost-effective progress is a good place to start.

Indeed, perhaps the world needs something like this. A collaboration whereby each country no longer respected pharmaceutical patents, but rather collaborates on sharing manufacturing and development, and indeed can then gain little from keeping secrets.

Practical Beginnings

There are practical issues, and none bigger than ‘how do you start doing this?’ The answer to that lies in protecting the investment funds who currently invest in pharmaceuticals, rewarding the shareholders – many of whom might be smaller than the millionaires you are currently imagining – and yet safely buying these companies out at sensible prices.

In terms of how much this might be, well, pharmaceutical companies are often valued with a P/S ratio (price to sales) of 4.84. But EV/S (enterprise values to sales) may be a better judge, as that takes into account debts/balance sheets, which are bought if a government is hypothetically buying out a company. That figure is 5.48. At a global sales figure of $1.6 trillion, that equates to a one-off cost of $8.77 trillion. That is assuming every single drug-producing company is bought out, which of course makes it an overestimation.

Yet, given we currently waste $912 billion per year (57% of our current spending), then even assuming no further spend on pharmaceuticals than the current system, and not taking into account any inherent practicality benefits (such as shared knowledge, economies of scale production, etc) we would break even in year 10. Few decisions which have such massive benefits for society could claim to be cost-effective that quickly.

If we assume, more sensibly, that we would save 33% on acquisition costs purely because not all companies need to be acquired (many are literally manufacturing patent-free things like paracetamol, for instance, which could continue, and others won’t do any R+D), or that the value for these companies will deviate downwards on news of government cooperation, then we’re looking at $5.79 trillion in acquisition costs.

And conservative estimates on the other side could be estimated, as benefits to the amount of 20% seem sensible yearly through collaboration, economies of scale, more joined up thinking on research, innovation on previously patented drugs, social care benefits from cheaper drugs meaning better outcomes for patients we couldn’t previously afford to treat, etc. This would save us approximately a further $320 billion a year. This kind of approximation would mean we break even in year 5.

We should add that none of this assumes any increases to GDP, which there undoubtedly would be, as people are not by and large losing jobs in these acquisitions as the ownership simply changes. Yet medicines and treatments are becoming much more widely available. Sick days are thus dropping, productivity rising, and general population health is increasing. To do all this and still break even in 5 years is remarkable. To do it all, at that point cost-free, and then have a doubling in investment in drug R+D globally from year 6 onwards would be astonishing.

The difficult bit is the international cooperation. Yet just two major countries could do this reasonably quickly: legislate against medical patents in the US, perhaps, or across Europe, and suddenly this system becomes a no-brainer for others to join.

Am I over-optimistic about this being something governments would actually do with such ease? Probably. Would it, though, be one of the most consequential changes human society could make globally for human wellbeing? Definitely.