A recent article
in the New York Times aroused my ire (it happens more and more often these
days). The article is about the stance of the pharmaceutical industry on world
drug pricing in the context of the ongoing negotiations for a Pacific Trade
Partnership deal. An Australian lecturer in public health was quoted as saying
that the annex in question should not even be on the table. The annex, it is
said, will raise global drug prices by allowing pharmaceutical companies more
control over the prices they can charge in participating countries. The companies want to make countries like
Australia more like the US in terms of the pharmaceutical market. No
wonder. The US accounts for about half
of all pharmaceutical profits worldwide.
Drug prices are an average of 30% higher in the US compared to the rest
of the world. While I don’t agree with the industry that making the world more
like the US is necessarily a good idea, I also do not think that using
Australia as a model for drug pricing is good for the public health either.
When I was at Wyeth, I remember debates
within our commercial organization as to whether it was even worthwhile to
market certain products in Australia at the prices the government would allow.
The population of Australia is 23 million – smaller than Canada’s 36 million
and less than one-twentieth the size of Europe. Some drugs might only be used
by a very small number of patients in Australia in any given year. The return
on any marketing investment might be quite minimal. Why bother? Higher prices might make the difference in
some cases. And, admittedly, for some
products, a concern for the public health frequently motivates the
pharmaceutical industry despite a general view to the contrary. Australia has a
particular way of valuing drugs where less frequent dosing, better activity,
and greater safety only provide marginal price increases compared to cheap
generics. Only “truly innovative" drugs (as they define them) get higher
prices. As such, Australians have some
of the lowest drug prices in the world, but lack some therapies that could
provide better public health. For a nice
overview on world health pricing, see the WHO report here.
The US is the only country (essentially)
that does not have (nor does it allow) national negotiations for drug
prices. Medicare is not allowed to
negotiate and neither is the Veterans Administration. This probably explains
our higher prices. It’s the Wild West
out there. Only the large, private,
managed care organizations and payers can carry out such negotiations. What this means, though, is that US dollars
drive innovation within the pharmaceutical industry. Why should the US taxpayer bear this burden
compared to the rest of the world? OK – some countries are poor and should not
be expected to pay the same prices as in the US. I agree.
See
what Gilead did about that recently. But compared to Europe, which, in spite of
austerity and the economic crisis, is not poor, we still pay about 30% more for
drugs.
On the one hand, fewer profits to the
industry will translate to less innovation in drug discovery and
development. This is clear – its just a
matter of how much of their profits companies invest in research. On the other
hand, it seems unfair that the US should bear the brunt of this burden. Trade negotiations should bring this into
balance. This might involve a greater
ability for national drug price negotiation in the US, and less stringent
controls in the rest of the world.
Since, on the US side, any change here would
require legislation. And legislation
that involves the US government actually spending money probably has as much
chance of passing as snow in Miami in August. But one thing is clear to me –
the US should not become Australia!
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