FREELOADING FOREIGNERS ARE SPONGING OFF
AMERICAN DRUG COMPANIES

Steve Forbes editorial below. Interesting and informative commentary on the U.S. pharmaceutical industry. I'm not really a fan of drug companies, but this does bring up an issue of fairness in the global economy. Why should other nations benefit from the billions of dollars U.S. drug companies put into research without paying their fair share?

Also I'm wondering if price controls in foreign nations were abolished or changed, would drug companies adjust their prices accordingly? Wondering what the other side's response to this commentary would be.


Fact and Comment
Steve Forbes, 11.24.03

The Freeloaders
Europe, Japan, Canada and much of the rest of the world are mooching off the U.S. pharmaceutical industry. They refuse to pay fair prices for the medicines that were developed through our drug companies' research and development. These nations have imposed price controls on medicines; medical manufacturers thus can't recover fair compensation for their R&D costs. Result: Americans are medically subsidizing the rest of the world. It's one thing to help struggling countries, quite another to help rich, developed, high-standard-of-living states such as Germany, France and Japan. Make no mistake: These countries are engaged in a costly form of piracy. As Food & Drug Administration head Mark McClellan recently pointed out, "The economic consequences of overly strict price controls on drugs are no different than violating the patent directly through compulsory licensing to make copies of the drug."

The costs of bringing a new drug to market run into the hundreds of millions of dollars. Globally, U.S companies now pay the lion's share of pharmaceutical R&D spending. When will foreign governments start to pay an appropriate share of the cost of developing these medical breakthroughs? Dr. McClellan recently asked that question in a major speech. While he offered no detailed answer, other than to suggest finding ways of pricing drugs overseas based on a nation's income, his question should be taken to heart by the Administration's trade policymakers.

McClellan's query isn't an academic one. Pressures are growing here at home to squeeze the pricing power of pharmaceutical companies. Treks by the elderly to Canada, on the hunt for bargain prescriptions, are a media staple. (Of course, stories about the flood of Canadians coming to the U.S. for advanced medications and treatments unavailable in medically socialized, short-on-care Canada are practically nonexistent.) Few people realize that Americans are unwitting ATMs for foreign drug consumers. The net result will be fewer disease-curing or -preventing, pain-reducing, quality-of-life-enhancing medical breakthroughs.

Foreign nations naturally show no sign of voluntarily coughing up more money; the short-term political benefits of underpricing medicines are irresistible. Brazil, for example, recently demanded that U.S. drug companies sell it medicines at prices charged the poorest of poor nations around the globe. While Brazil is still a developing country, its economy is nonetheless the world's ninth largest. Why should it get the same bargain as disease-ridden, poverty-stricken Haiti, which has a per capita income barely one-sixth of Brazil's?

Should pharmaceutical companies refuse to sell to rich countries? Not before the American public--and foreign ones--are fully aware of how those nations are sponging off of us. We'd also better be prepared to fight hard if some of those nations rip off our companies' patents.

McClellan demolishes the charge that there are other factors at work catapulting the prices of medications in America. Consumer advertising? "On net such advertising benefits the public health. It gets more people into treatment for conditions that are undertreated in the population. [It] account[s] for less than 2% of U.S. pharmaceutical spending." Too much spending on "me-too" drugs? "Over the 1990s, only about 20% of pharmaceutical R&D spending was devoted to improving or modifying existing products," and many of these were perfectly justified medically.

So let's see if the pols and the media glom onto the real villains of our high-cost medicines--freeloading foreigners.