Europe’s drug industry is a model for United Sates to avoid

Just a decade ago, Europe conducted more than two-thirds of all drug research, whereas now the United States accounts for two-thirds, says Grace-Marie Turner of Galen Institute.

Europe's deliberate government policy, in the form of price controls imposed by national health care systems, slowly choked a once-thriving economic sector. After all, Europe's government buys most drugs and therefore sets drug prices 40 to 60 per cent lower than the free-market prices in the United States. However, these controls seriously hurt innovation, says Turner.

Consider the impact of Europe's price controls:
 

• Major European drug makers – such as Aventis, Novartis and GlaxoSmithKline – shifted significant portions of their research operations from the Europe to the United States and beyond.
   
• Human talent follows the research money; some 400,000 European science and technology graduates now live in the United States, with thousands more leaving every year.
   
• In 2002, the United States introduced 85 new drugs, whereas Europe only introduced 44.
   
• The loss to research caused by price controls, according to an international study by the U.S. Department of Commerce, caused a $5 to $8 billion annual reduction in funding for drug research and development.
  
  Ironically, says Turner, the U.S. Congress added a new prescription drug benefit to Medicare, and to deliver the benefit, the government encourages negotiation for the best prices among private, competing pharmaceutical companies – essentially setting prices for all 40 million Medicare recipients.
  
  If this happens, research-based pharmaceutical companies will move on to Asia, where technology and education continually improve, says Turner.
  
  Source: Grace-Marie Turner, Europe's Drug Industry is Model for U.S. to Avoid, Heartland Institute, February 2006.
  
  For text: http://www.heartland.org/Article.cfm?artId=18489
  
  For more on Health: http://www.ncpa.org/iss/hea/
  
  FMF Policy Bulletin/ 28 March 2006