How the same drug costs three times the price in the US than in Europe

[Joanne98]

by Steven Kyle (NY) on 10/05/2009 12:01:00 PM

(NOTE FROM JOHN: This really ticks me off. Apparently, governments in Europe tell the drugs companies that they simply can't charge crazy prices over here in Europe, so they don't. Instead, they jack the prices up in the US to make up the difference. Absolutely criminal. So why haven't we heard about this from our elected officials, ever?)

This post is inspired by John A’s question about his asthma medicine, Advair and draws on conversations I have had with some industry insiders who prefer to remain unnamed. Though Advair is sold under different names in France (Seretide) and in the USA (Advair), it is in both cases the identical drug manufactured by the same company, GlaxoSmithKline. So how is it that it costs 60 euros in France, but $270 in the states - nearly three times as expensive in the USA? And what can we do about it?

First, the most important fact is that France controls the price and the USA does not. While it is not entirely obvious (at least to me) on what basis they pick the price, it is clear that France has a consumer driven system where the government’s goal is to make its citizens happy without worrying at all about drug company profits. But there is no question that the drug company (GlaxoSmithKline) is free to stop selling the drug in France if they can’t make a profit. So we know that they can make money at the controlled French prices – no surprise since they already have the production process up and running and the cost of actual ingredients in prescription drugs is less than 10% (on average) of the selling price in the USA.

But what of the price in the USA? How is that picked? While drug can't entirely ignore the demand side of the market (e.g., if they price too high, insurance companies can refuse to cover the drug under their plans), they DO have monopoly power. The patent rights that companies get for prescription drugs last 20 years -– but that period includes the time required for clinical testing, reducing the effective patent protected period of sales to less than half that time. Companies make good use of this protection as any capitalist monopolist would -- they charge a price designed to maximize company profits.

Should we then just limit prices to the 10% of current prices that represent the cost of actual ingredients? Certainly not. A major portion of the cost of a drug is the research and development that goes into finding it in the first place. After all, years of research and clinical trials are needed for a new drug and only about one in ten drugs that make it to trials ever pan out and make it onto pharmacy shelves. It is only fair that companies be able to recoup this amount. It is worth noting that it isn’t fair at all for the entire cost of R & D to be borne by US consumers alone as is the case right now with controlled prices everywhere else in the world

Continued>>>
http://www.americablog.com/2009/10/how-same-drug-costs-three-times-price.html

[Hepburn]

1. Because for profit corps control healthcare in the US...

...and the same is not true for elsewhere.

[napi21]

2. I believe Canada also negotiates rates and the US doesn't. n/t

[Hepburn]

4. I think you are correct....

...and IMO the big issue is: Does the govt control the for profits so that the people can and do afford what is needed to keep/make them well.

:hi:

[Fresh_Start]

3. Meme: Big Pharma charges US customers high prices to

subsidize low cost drugs in France.

That ought be rile up a few of the wingers especially with their love of all things French.

[SPedigrees]

5. The irony is that US citizens

driving across the border to Canada or Mexico to fill their prescriptions are paying considerably less for the same drugs from the same US pharma cos that would have price gouged them in their own country. They are re-importing drugs exported to Canada/Mexico by the same US drug cos that charge an arm and leg for the same medications, ie meds that have never gone on vacation to a neighboring country and come back again.

[unblock]

6. well, here's the pharma/right-wing response:

pharmaceutical companies lose a ton of money researching drugs that never make it to market, so they need to make jackpot money on the ones that do make it to market, at least for some period of time, in order to cover the costs of the failed efforts.

now, once they HAVE that jackpot in the form of the current u.s. sky-high-pricing market, they're content to make a merely normal profit in places like france. but if we removed the u.s. jackpot, they would have to hike prices elsewhere to make up for it, i.e.., to grab their jackpot from more countries rather than just the u.s. bottom line, if we limit our prices, pharma will hike france's prices.

the flip side of this is that we are effectively subsidizing france's modest prices.

[reggie the dog]

7. Other drugs are cheaper too

top quality grass goes for 15 euros an eighth here (formerly 100 francs).........