E-DRUG: AIDS and other drugs can be cheap
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A new article in the BMJ documents how drug companies earn back all their R&D expenses each year in the research-oriented countries. This means that HIV/AIDS drugs and others can be priced to developing countries at manufacturing cost plus profits. Such prices are typically 5-10% of wholesale prices in the West.
Another implication of the article is that the IP protections that raise prices and extended high prices in countries that sign a U.S. Free Trade Agreement are unwarranted, because the rationale is (again) that pharmaceutical companies do not earn back their R&D costs at European prices and therefore must force higher prices through FTAs like the Central American FTA.
The article can be accessed at the toll free link:
http://bmj.bmjjournals.com/cgi/content/full/331/7522/958?ijkey=tUnnhNxsfKv8Xyc&keytype=ref
A forthcoming analysis will show that most of the funds worldwide for research to discover new drugs come from the public, not from industry. This has significant implications for policies on patents and setting priorities for research.
If people want to write or call me, I would be happy to help.
Yours sincerely,
Donald W. Light
tel: 1-609-915-1588
fax: 1-609-924-1830
dlight@princeton.edu
[The article is too long for e-drug but the introduction, summary points and conclusions follow. BS]
Foreign free riders and the high price of US medicines
Donald W Light, professor 1 Joel Lexchin, associate professor 2
1Department of Psychiatry, University of Medicine and Dentistry of New Jersey, 40E Laurel Road, Stratford, NJ 08084, USA, 2School of Health Policy and Management, York University, Toronto ON, Canada
BMJ 2005;331:958-960 (22 October)
Introduction
The United States government is engaged in a campaign to characterise other industrialised countries as free riding on high US pharmaceutical prices and innovation in new drugs. 1This campaign is based on the argument that lower prices imposed by price controls in other affluent countries do not pay for research and development costs, so that Americans have to pay the research costs through higher prices in order to keep supplying the world with new drugs. 12Supporters of the campaign have characterised the situation as a foreign rip-off. 3We can find no evidence to support these and related claims, and we present evidence to the contrary. Furthermore, we explain why the claims themselves contradict the economic nature of the pharmaceutical industry.
Summary points
- Prices of patented drugs are substantially higher in the US than in other affluent countries
- Published reports indicate that pharmaceutical companies in affluent countries recover research and development costs from domestic sales with substantial profits
- Discovery of innovative new drugs in Europe is proportionately equal to that in the US
- US pharmaceutical companies invest just 1.3% of net sales in basic research
- The idea that the US is subsidising other rich countries contradicts basic economics and the global nature of pharmaceutical markets
Conclusions
The pharmaceutical industry has provided invaluable medicines to cure and relieve millions of patients throughout the world. As an industry, it drives economic growth and employs thousands of skilled people. But it also uses false economics and makes up stories to justify higher prices. Higher prices strain budgets, causing millions of US patients not to take the drugs their doctors think necessary. The pharmaceutical industry and the US government want to blame other developed countries for these higher prices rather than make drugs more affordable.