NCPA - National Center for Policy Analysis

Drug Research Exits Europe

May 9, 2002

Drug research companies are fleeing Europe for the United States, says the Wall Street Journal, warning against the type of regulations and price controls that have made it unprofitable for them to remain there.

In 1990, the U.S. had only 70 percent of the investment in pharmaceutical research that Europe did; by the year 2000, those numbers had reversed. Among those who have switched:

  • Switzerland's Novartis announced Monday it would shift its center for global research to Cambridge, Mass.
  • French-German drug maker Aventis brought its research center to New Jersey in 1999.
  • Formerly Swedish Pharmacia moved its base of operations from London to New Jersey after merging with Upjohn in 1995.

Europe's government-run health-care systems are monopoly purchasers of pharmaceuticals, and they push drug prices down to 40 percent to 60 percent of U.S. levels. However, patients are also often denied access to approved drugs for years while discount prices are negotiated. And, lest consumers start demanding expensive drugs, the same governments also ban direct-to-consumer advertising.

Communities of research excellence like the one Novartis wants to use in Cambridge tend to spring up in the environments likely to reward innovation, concludes the Journal. And for pharmaceuticals, the United States, with its strong patent protection and comparatively free medical market, is that environment.

Source: Editorial, "The Novartis Warning," Wall Street Journal, May 8, 2002.


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