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Variations on a common tablet design, which can be distinguished by both colour and shape. — Photo by Ragesoss (CC BY-SA 2.0)
Drug price controls in several OECD nations are reducing biopharmaceutical research and development (R&D) by more than $56 billion per year, according to a US-centric organisation. The impact of this, a report argues, is to apparently deprive the world of around 25 new drugs annually. This is according to a new study by the Information Technology and Innovation Foundation (ITIF), who are a think tank for science and technology policy.
ITIF has analysed prescription drug prices in 32 OECD nations and calculated that if countries paid a higher amount for medicines manufactured in the U.S. then pharmaceutical revenues would increase by $254 billions of which an estimated $56.4 billion could have been invested in R&D.
The report is critical of five nations in particular: Japan, Italy, Germany, France, and the U.K. In each of these countries, price controls are in place meaning that medicines are purchased at an agreed lower rate.
The report examines the pharmaceutical price regulations of OECD countries and finds that after adjusting for GDP per capita, 30 of the 32 OECD countries had lower prescription drug prices than the U.S.
The report contends that if developed nations allowed drug prices to reach just 75 percent of U.S. levels, pharmaceutical R&D expenditures could have increased by an additional $23.9 billion, creating at least 11 new drugs annually. Is this correct? If it is correct, does it matter – does the social good outweigh the economic gain?
In the U.K., as an example, the Pharmaceutical Price Regulation Scheme is a voluntary arrangement between the Department of Health and individual drug companies, which determines the prices companies can charge the National Health Service (NHS) for their drugs. Prices for branded (on-patent) and generic (copies of off-patent brand) drugs are set differently. Also, in Canada, drug prices undergo government review through a variety of different mechanisms.
In the U.S., prescription drug prices are relatively high. The prices are driven by the absence of rules applying to brand-name drug manufacturers, who are free to set their prices at the time of launch. In contrast, in other countries, the prices of medicines are systematically negotiated on the basis of the benefits that the drugs provide between governments and drug manufacturers.
The ITFF, who are leading the charge against most other developed nations and is making the case for U.S. pharmaceutical sector interests, is not without criticism. One complainant states: “there is evidence that tech firms and their lobby groups are affiliated with the think tank – from having founded, funding and overseeing its work. Some firms even describe themselves as members.”
This begs the question: In whose interests is the report written? Is this designed to benefit the profit margins of pharmaceutical firms?
The report uses politically charged language and accuses developed nations of “free riding” and requesting that they “join the club.” Furthermore it is stated: “It’s time for other wealthy countries to pay their fair share, too, because it accrues to the benefit of global health.”
However, the report does so from a neoliberal economic perspective. Many of the OCED countries criticised have policies that seek to disrupt medicines to their citizens at the lowest possible price so that the maximum volumes can be provided. In the U.K., this includes the provision of healthcare at affordable prices.
The U.K. government approach on pricing is specifically designed to enable pharmaceutical firms to invest in R&D; what the pricing mechanism aims to do is to place a cap on excessive profits being generated by the pharmaceutical sector.
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