Price controls stifle drug development
September 14, 2003
by Dr. David Gratzer
Sometimes a bargain isn't a good deal. Such is the reasoning of the European Union in reviewing pharmaceutical pricing. After careful study of the continent's price controls, the EU feels Europeans pay too little for their drugs. And so, the EU wants companies to have the freedom to price as they wish. Here's the irony: Just as the EU discovers the problems of price controls, U.S. lawmakers are eyeing it for Americans.
Late last month, when European health ministers were being advised of the importance of drug pricing freedom, the House approved a bill on drug reimportation by a whopping margin, 243-186. Reimportation would allow Americans to purchase pharmaceuticals from nations like Canada where governments fix drug prices. In other words, it's a back door for introducing price controls. ''It's about money, the money that the pharmaceutical companies are making on the backs of the American people,'' Rep. Dan Burton (R-Ind.) explains.
Actually, it's about research and development. And here's the connection between Europe's decision and Congress' folly. Pharmaceutical innovation is pinned on profitability. While 20 years ago pharmaceuticals were largely developed in Europe, European price controls made drug development an American enterprise. Fifteen of the 20 top-selling drugs worldwide this year were birthed in the United States. And even European firms such as GlaxoSmithKline have moved essential work across the Atlantic, to American shores. No wonder the EU is reconsidering their regiment of price controls.
Drug development isn't an academic issue, something debated in the quiet halls of Brussels with no relevance to the outside world. Consider the story of cyclist Lance Armstrong. Just as the House prepared to vote, Armstrong won the Tour de France for a fifth straight time and established himself as one of the greatest cyclists of all time. Armstrong is also a cancer survivor. In 1996, he was treated for testicular cancer that had metastasized. He had 40 tumors in his lungs and two in his brain.
Thirty years ago, a diagnosis of testicular cancer was essentially a death sentence. Twenty years ago, survival rates started to improve, but the cure was only marginally better than the disease. Chemotherapy then lasted up to two years, often leaving patients with nausea and other harsh side effects.
Today, roughly 96 percent of Americans survive the illness, just as Armstrong did. The biggest improvement in care? Better drugs. Chemo typically takes under three months and is highly effective. At a news conference earlier this year, Armstrong observed: ''I owe my life to cancer research.''
That's an important point. While congressmen and the usual suspects of industry critics rail against making money, the fact is that profit helps fund the incredible expenses of medical research. A new drug may cost $500 million to $800 million to bring to the market. Without powerful monetary incentives (and the capital needed to underwrite the process), no one would take on the challenge. If Americans want innovative new prescription drugs, they need a profitable pharmaceutical industry. Price controls, such as the ones used in Canada and Europe, kill research and development.
Of course, cheaper drugs offer a siren song. It's enough of a savings that the small town of Springfield, Mass., has already begun reimportation for city workers. ''As far as I am concerned, it would be irresponsible not to take advantage of the savings,'' said Mayor Michael Albano.
According to Rep. Jo Ann Emerson (R-Mo.): ''A bottle of tamoxifen, used to fight breast cancer, costs $360 in the United States. It costs $60 in Germany. If the drug companies have their way, the sorry status quo will be maintained.''
Tamoxifen, which interferes with the female hormone estrogen, is an example of the incredible success of cancer research. A study published in the Lancet, the prestigious British medical journal, finds that taking tamoxifen after treatment for breast cancer reduces five-year recurrence by 42 percent and mortality by 22 percent. Tamoxifen, in other words, is a life-saver. It's also an American drug.
One final point: Countries with price controls don't exactly offer patients nirvana. In a sweeping review of price regulation and product launch times, University of Pennsylvania Professor Patricia Danzon finds that the more meddling in price, the slower the introduction of new drugs. Taxol, a highly effective drug used in the treatment of advanced breast cancer, is a case in point. Approved by the EU in 1995, it didn't reach British patients for a half decade. Perhaps it's not surprising, then, that five-year survival rates for breast and testicular cancer are better in the United States than in Europe.
In October, Armstrong will lead the Tour of Hope, a 20-day cycling event designed to raise awareness for and appreciation of cancer research. Given the anger at American pharmaceutical companies, his campaign may prove a more daunting task than winning the Tour de France.
David Gratzer, a fellow at the Manhattan Institute, is a physician based in Toronto and author of Code Blue: Reviving Canada's Health Care System.
©2003 Chicago Sun-Times
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