U.S. Drug Cost Close to Europe, Disproving Socialism Chills Innovation.

Here's an odd story trashing PhRMA's age old claims about Europe and high drug prices. According to the Financial Times:

The Financial Times: Claims by the US drugs industry that the US disproportionately funds research and development of new drugs by paying higher prices than Europe for its medicines have been undermined by a new study to be published soon in Health Economics, Policy and Law. The London School of Economics argue in their report that a rigorous like-for-like comparison shows that transatlantic differences in patented medicine prices are modest and declining over time. The co-authors conclude that “public prices for branded prescription medicines in the US are comparable to those in key European and other OECD countries”.

Their findings are an embarrassment for the industry, and notably PhRMA, its powerful Washington, DC-based trade body. In the past PhRMA has argued that Europe’s ill-conceived public policies, including price controls and sluggish regulatory decision-making, have chilled innovation and raised doubts among private investors who help to underwrite research. This data suggests profits in the US are only marginally greater than in Europe.

Past studies of drug price differences – including by the US General Accounting Office and by congressional officials – have suggested that US prices are at least one and a half times those of European prices. Such comparisons are flawed, often comparing European list prices with US factory gate ones, which do not take into account the discounts negotiated between manufacturers and health insurers in the US. He says some previous studies have also taken unrepresentative samples.

By taking a basket of 68 of the leading branded prescription medicines … authors conclude the US prices are a maximum of 25 per cent higher than European ones, and below Mexican levels.

Based on a comparison of prices … there is convergence over time, with innovative medicines becoming more expensive across the US, Europe and other countries.
But (the study) demonstrates that manufacturers of branded drugs do not significantly cut prices to compete with lower cost generic rivals once patents expire. Governments typically have to ensure that prescribers switch to generic alternatives to save money.