Europe’s the leader in drug research; What is it we’re paying extra for?

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The drug companies’ argument against letting government bargain for bulk prices on prescription drugs is so familiar that even talk radio hosts know it by heart: If the U.S. cuts drug prices (like Europe has), the great American engine of pharmaceutical research will put on the brakes. That’s why a new study by the Health Affairs journal (subscription) is such a surprise. It turns out U.S. drug companies do less research than European companies, and Europe’s lead is expanding.

So either the argument is a load of hockey pucks, or the U.S. drug industry meant to say that American consumers need to pay high prices to support fast-growing European drug research. That would be worse than having to say "freedom fries."

The author of the health affairs study, Prof. Donald Light, argues that the study shows the U.S. drug industry shouldn’t get the protection of exorbitant domestic drug prices.

Today’s Health Affairs news release said:

"Congressional leaders and others concerned about high prices of new patented drugs will be heartened by this analysis, because lower European prices seem to be no deterrent to strong research productivity,” writes Light. He cites previous research showing that pharmaceutical companies are able to recover research costs and make a "good profit” at European prices, and he rejects the notion that Europeans are “free-riding” on American pharmaceutical research investments.

In fact, U.S. drug pricing looks more and more like the kind of "protection" money extracted by street gangs. 

Here’s the free abstract of the study.

A 2004 article in the New England Journal of Medicine noted that European prices for brand-name drugs "are 35 to 55 percent lower in other industrialized countries than in the United States. The central reason for these price differentials is that Canada and most European countries… directly regulate the prices of prescription drugs. High U.S. prices are said to be necessary to cover the costs of research and development for new and better drugs, given the price levels in Europe and Canada. Americans are increasingly asking why they should subsidize the development of new drugs that are also used by Canadians and Europeans."

At least now Americans can stop asking and turn to demanding change in this country. The first simple step would be allowing Medicare to bargain directly for prescription drugs for seniors, as an alternative to the insanely complex and overpriced drug benefit that Medicare offers now. Either that or just open the U.S. market for importation of drugs (often U.S.-made drugs) at European prices.

Oops. Maybe not. Those are the two things that the pharmaceutical industry says the White House has promised not to do, in exchange for the industry’s support of other kinds of health care reform.

The new study is a good reason to revisit that bad promise.

Consumer Watchdog
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