FDAnews Drug Daily Bulletin

REPORT: PRICE CONTROLS HURT INCENTIVES TO IMPROVE BRAND DRUGS

April 18, 2006
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Price controls discourage the development of second-generation brand drugs, according to a report issued recently by the American Enterprise Institute-Brookings Joint Center.

But the U.S. biotech industry also hurts innovation by charging too much for their products in other countries, which discourages drug uptake and use, the report said.

The study compared the prices of 43 drugs in Germany, France, Canada, Australia and the UK to drug prices in the U.S.

All other economically advanced countries except the U.S. have initiated some form of drug price controls. The vast majority of citizens in those counties rely on public healthcare systems, making their government the sole drug purchaser.

With this limited customer base, nations with price controls can theoretically "free-ride" on the U.S., where drug companies can charge higher prices. This provides a disproportionately low return to pharmaceutical companies that want to recoup their R&D costs, the report said. The U.S. Department of Commerce's International Trade Administration also suggested recently that international price controls are substantially retarding the development of new drugs, according to the report.

The U.S. biotech industry's pricing policy is also suppressing innovation, the report said. Anecdotal evidence suggests that biotech companies charge the same price in all developed countries for their products. This discourages even wealthy nations outside of the U.S. from using biotech drugs, which reduces the expected payoff from innovative new drugs, the report said.

To read the report, go to http://aei-brookings.org/admin/authorpdfs/page.php?id=1265 (http://aei-brookings.org/admin/authorpdfs/page.php?id=1265). (http://www.fdanews.com/did/5_75/)