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European drug pricing and its

implications

By group 2

Sankalp

Himanshu

Soumyajit

tanviraj

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Low drug prices in European Union

Huge variation inprices ofmedicines as

compared to US. Savings of $160

billion for Europein 2002.

Cumulative savingsof $1trillion from1992.

Lipitor price inparis-60 cents,price in us-

$3.98. Tamoxifen-$360

in us,$60 Germany.

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Low pricing -a bane

Big savings wereapparentlylucrative.

Paying a heavyprice in the longrun

Price control

resulted in 25-30% Lower prices

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US captivating drug market

High drug prices inus made it moreattractive market

Big pharmaceuticalcompanies shifted

to us.

Competitive positionof Europe declinedas compared to US

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European govt- monopsony

European govt had been monopsonistprice setters.

Public health was under the govt. In monopsony market there will be

only one buyer and many sellers.

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Health care models-EU

Comprehensivesocial insurance-public and privatefunding.

Hospitals & drugproviders got thedues repaid fromgovt.

Followed by-Germany,France,Switzerland

National healthservices-funded bypublic.

NHS UKfundedthrough taxpayersmoney & privatehealth insurance.

Followed by-UK,Sweden,Italy.

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Between 1990-2000 Europeannations spent

7.7% of total GDPon health caresystems.

Different kinds of

drug price controlsfor public healthcare systems.

Reference pricing

Profit regulation

Product price

controls

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Reference pricing

the patient has to bear thedifference that exceeded thereimbursement level by the govt.

Germany and the Netherlands -1st

to adopt.

Breakthrough drugs were excluded .

Sweden and Denmark also followedthis system

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Profit regulation & profit pricing

Govt. controlledthe max profit acompany couldgenerate.

Spain-18% max

profit UK-21% max

profit

Prices determinedby comparing prices

with referencecountries.

Greece-minimumprice fromneighbouring country

Czech republic-lowest price asmaximum price

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Implications of low drug prices

Decreased level of R&D spending. Lower revenues & lower profits for

companies.

Companies Migrated to US for R&DDue to the low IRR in europe. $14.8 billion invested for R&D in

Europe $20.9 billion by US in 2000. In further years it was $20billion v/s

$30 billion

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ROI in 1992

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

revenue profit

ROWEurope

U.S.

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IRR in 2002

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

revenue profit

ROWEurope

U.S.

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Loss of jobs inEurope

British drug co.

GlaxoSmithKlinemoved its R&D toAtlanta

Britain lost 65000

jobs in 2001

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Savings=losses

In 2002 Germanysaved $19 billion.

LOST $4billion on

patents and otherR&D relatedbenefits.

$8billion on R&Djobs.

$3billion in termsof profits thatfirms could haveearned.

$2billion-sheddingcorporate HQ.

$5biilion poorerpublic health.

$3billion-bargainto lower its drugprices

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cheaper & inaccessible drugs

Health care systems relied oncheaper,older,less effective drugs.

New & Lifesaving medicines notaccessible .

Entry of new drug delayed by 18months-negotiations over pricing.

Taxol a cancer treatment drugavailable in Britain after 5 years ofits approval in 1995.

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Current scenario

Greece, Spain and Germany slashingthe price their healthcare systemspay for medicines.

Europe accounted for 30.6%of globaldrug sales in 2010, against 39.8% inAmerica.

Novartis,Johnson &Johnson,GlaxoSmithkline areconcerned about the acceleratingprice erosion by EU

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