Skip to NavigationSkip to content

Industry's European price 'free riding' claim refuted

Published on 08/11/05 at 10:30am

Long-standing claims that the US has been burdened with high medicines prices because of 'free riding' by European countries have been challenged in a new research paper.

Two eminent North American physicians have published the paper in the BMJ, refuting claims by some industry leaders and even Mark McClellan, the then-FDA head, that lower prices in Europe hold back pharmaceutical R&D.

Donald Light, psychiatry professor at the University of Medicine and Dentistry in New Jersey and Joel Lexchin, associate professor of health policy and management at York University, Toronto say the claims do not stand up to scrutiny.

"We can find no convincing evidence to support the view that the lower prices in affluent countries outside the US do not pay for research and development costs," the authors state.

"The latest report from the UK Pharmaceutical Price Regulation Scheme documents that drug companies in the United Kingdom invest proportionately more of their revenues from domestic sales in research and development than do companies in the US. Prices in the UK are much lower than those in the US yet profits remain robust."

The authors say R&D spending in the UK, Switzerland and Sweden as a percentage of the country's GDP was higher than the US, but with medicines prices around 30% lower.

Despite this, they say companies still manage to recoup their R&D costs in these countries and make a healthy profit through domestic sales.

The authors conclude: "The claim by some companies that they have to set prices at 50-100 times production costs to recover R&D costs have never been proven, because they have never opened their books to independent public research to prove it.

"What we do know is that all R&D costs are fully recovered each year from domestic sales in the UK and Canada at prices that are far lower than those in the US."

A report into the differences in pricing between OECD countries and the United States by the US Department of Commerce published in December 2004 concluded that price cuts in Europe would not benefit US drug purchasers in the short-term.

The report suggested an end to price controls in Europe could be achieved with no cost to governments if greater access was given to generic competition, and would also help industry R&D.

Related articles:

Biotechs back change to UK pricing system

Friday , September 16, 2005






Mission Statement is a leading portal for the pharmaceutical industry, providing industry professionals with pharma news, pharma events, pharma service company listings and pharma jobs,
Site content is produced by our editorial team exclusively for and our industry newspaper Pharmafocus. Service company profiles and listings are taken from our pharmaceutical industry directory, Pharmafile, and presented in a unique Find and Compare format to ensure the most relevant matches