E-drug: WHO's role in trade agreements-preferential prices (cont'd)
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I doubt that parallel importing has been the main concern preventing
preferential pricing so far. Currently there are legal barriers preventing
parallel imports back into the US or the European Union (in the EU
there is parallel importing only between member countries). It does not
seem these legal barriers will be dropped any time soon.
If I would be in the industry I would fear far more that preferential
prices could undermine my price policy in rich countries. Senior
citizens in the US would start asking why they should pay 10-20
times more for the same product from the same producer (they are
already asking why they pay twice as much as their friends in
Canada).
I think the solution is "simple" and consists of two steps: first, the
industry needs to declare what their true R&D expenses are.
Secondly, R&D costs can be added to the production costs (and
reasonable profit margin) in rich countries; developing countries will
not be charged for R&D. With this arrangement the industry will be in
a very strong position to defend higher prices in industrialized
countries.
Although this is still a very industry friendly approach it is unlikely to
happen yet. We know that industry estimates on R&D costs are wildly
inflated and price drops everywhere would occur if prices would be
based on the true R&D costs. Continued NGO pressure and frequent
use of compulsory license might make the above solution more
attractive in the near future... If the industry wants to keep their only
argument in the pricing discussion valid they will need to make R&D
costs transparent. It's time for the media to question why industry
estimates for R&D are above $ 500 million per drug while other
estimates are in the range of $50-80 million or even lower. According
to James Love, NIH estimates for antiretroviral development (until
phase II) in the late 80's are in the range of $2.6-5 million per drug!
I said the above suggestion is industry friendly because the Australian
Pharmaceutical Benefits Scheme does not consider R&D costs as a
justification for the price. As David Henry has pointed out, Australian
drug prices follow the analysis of comparative clinical effectiveness.
Incremental health gains will allow for incremental cost increases as
compared to the old drug. High development costs for a drug with no
or little additional benefit is therefore a bad investment decision in the
Australian system.
Again, if I would be in the industry I would prefer to have my price
based on R&D costs even if I would need to tell the truth about my
expenses!
Tido von Schoen-Angerer, MD
Medecins sans frontieres
Bangkok, Thailand
msfdrugs@asianet.co.th
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