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European drug pricing and its implications

By group 2 Sankalp Himanshu Soumyajit tanviraj

Savings of $160 billion for Europe in 2002.98.price in us$3.Low drug prices in European Union € € € Huge variation in prices of medicines as compared to US.$60 ² Germany. Cumulative savings of $1trillion from 1992. . Tamoxifen-$360 in us. € € Lipitor price in paris-60 cents .

Paying a heavy price in the long run Price control resulted in 2530% Lower prices .Low pricing -a bane € € € Big savings were apparently lucrative.

€ Competitive position of Europe declined as compared to US .US ² captivating drug market High drug prices in us made it more attractive market € Big pharmaceutical companies shifted to us.

€ In monopsony market there will be only one buyer and many sellers.monopsony European govt had been monopsonist price setters. € Public health was under the govt.European govt. € .

Switzerland € National health services-funded by public. € Followed byUK. € Followed byGermany. € NHS ²UK²funded through taxpayers money & private health insurance.France. € Hospitals & drug providers got the dues repaid from govt.Sweden.Italy. € .Health care models-EU Comprehensive social insurancepublic and private funding.

7% of total GDP on health care systems.€ € Between 19902000 European nations spent 7. € € € Reference pricing Profit regulation Product price controls . Different kinds of drug price controls for public health care systems.

€ Sweden and Denmark also followed this system € . € Breakthrough drugs were excluded . € Germany and the Netherlands -1st to adopt.Reference pricing the patient has to bear the difference that exceeded the reimbursement level by the govt.

Profit regulation & profit pricing € € € Govt. Spain-18% max profit UK-21% max profit Prices determined by comparing prices with reference countries. controlled the max profit a company could generate. € Greece-minimum price from neighbouring country € Czech republiclowest price as maximum price € .

€ Lower revenues & lower profits for companies. € Companies Migrated to US for R&D Due to the low IRR in europe.8 billion invested for R&D in Europe € $20.Implications of low drug prices Decreased level of R&D spending. € $14.9 billion by US in 2000. € In further years it was $20billion v/s $30 billion € .

ROI in 1992 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% revenue profit ROW Europe U. .S.

IRR in 2002 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% revenue profit ROW Europe U.S. .

€ € € Loss of jobs in Europe British drug co. GlaxoSmithKline moved its R&D to Atlanta Britain lost 65000 jobs in 2001 .

Savings=losses € € € In 2002 Germany saved $19 billion. $5biilion ²poorer public health. $2billion-shedding corporate HQ. € € € € $3billion in terms of profits that firms could have earned. $8billion on R&D jobs. $3billion-bargain to lower its drug prices . LOST $4billion on patents and other R&D related benefits.

€ . € Entry of new drug delayed by 18 months-negotiations over pricing.older. € Taxol ²a cancer treatment drug available in Britain after 5 years of its approval in 1995.cheaper & inaccessible drugs Health care systems relied on cheaper.less effective drugs. € New & Lifesaving medicines not accessible .

GlaxoSmithkline are concerned about the accelerating price erosion by EU € .8% in America.Current scenario Greece.6%of global drug sales in 2010. Spain and Germany slashing the price their healthcare systems pay for medicines.Johnson & Johnson. against 39. € Europe accounted for 30. € Novartis.