NCPA - National Center for Policy Analysis

Drug Companies Fight European Price Controls

January 2, 2002

While Americans complain about high drug prices, observers say it's worth considering the role European socialism plays in the prices Americans pay for medicine, and how drug companies have begun to fight back.

  • It costs $800 million to create a new drug and drug companies attempt to make a profit by charging what the market will bear in the U.S.
  • Research and regulatory costs are rising fast -- total industry research and development (R&D) last year is expected to be about $30 billion.
  • But in socialist Europe, governments set prices for political reasons - meaning Europeans refuse to pay their share of drug R&D costs.
  • Drug prices in France, for example, average just 42 percent of their U.S. level.

Now, drug makers are realizing the American market can't single-handedly fund the world's drug research forever, and parts of the industry have decided not to take it any more. Pfizer recently told the French government that unless it reevaluates its pricing policies, Pfizer might not sell certain drugs there. Astra-Zeneca has said it may pull out of some European markets if it can't get better prices.

Europe used to have its own drug industry, critics add, but price controls forced companies to shift their research dollars to the U.S. They add that the drug companies' hard line might show European consumers that the price of socialism is fewer life-saving drugs.

Source: Editorial, "Europe's Addiction," Wall Street Journal, January 2, 2002.

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