NCPA - National Center for Policy Analysis

Prices Controls Hurt European Drug Companies

December 13, 2001

The pharmaceutical industry has long chafed under European governments' efforts to cap drug prices. Until recently it has channeled its grumbling behind the scenes, but observers note more companies are going public with their complaints.

Governments across Europe are trying to crack down on soaring health care budgets in part by cutting drug prices. Also, differences in prices lead to "parallel trade," where wholesalers buy drugs in bulk in countries with low prices then ship them for sale in countries with higher prices.

  • Prices in the United Kingdom, the Netherlands, and Nordic countries are usually higher than those on the southern tier of the continent.
  • Pfizer estimates as much as 20 percent of some of its drugs sold in the U.K. come via middlemen who bought them in other European countries, then pocketed the difference.
  • European Union officials say they won't block anything that enhances cross-border trade -- and national officials say they have no choice but to rein in prices with artificial price controls.

Meanwhile, it can take a long time to get a drug product on the market in Europe after it has been granted marketing authorization.

  • Belgium, Central and Eastern Europe and Greece have 360-day waits.
  • Italy, Portugal, the Netherlands and France have waits between 248 and 293 days.
  • The shortest waits are Germany at no days, U.K. at 15 and Sweden at 45 days.

Drug companies are now intimating they will take investment and research dollars out of Europe and put them in the friendlier U.S. market if Europe remains unfavorable.

Source: Vanessa Fuhrmans and Scott Hensley, "Price Controls in Europe Draw Drug Makers' Criticism," Wall Street Journal, December 13, 2001.

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