[Ip-health] Response vol. 23, issue 10, topic 4

rene soria rene.sorias at gmail.com
Thu Mar 15 10:59:32 PDT 2012

I'll be grateful if you could publish my response.

Thanks in advance.

Rene Soria-Saucedo
Boston University
School of Public Health
Health Policy & Management Department
715 Albany Street, W350
Boston, MA 02118-2526

I'm writing in regard of the comments made here:


For example, Mr. Ian Read claims: "Europe is not paying its fair share of
innovation." and “European governments are sacrificing the long-term future
of science in their countries for the sake of short-term budget cuts”

That’s simply not true. There’s a myth in the US, backed by the
pharmaceutical industry, trying to link lower prices with lower innovation,
especially when talking about EU. The British Medical Journal, published in
2005 an article about ‘Foreign free riders and the high price of US
medicines’; the authors’ main findings were clear:

*Lower prices do not lead to less research*: “The European Federation of
Pharmaceutical Industries and Associations reported that, between 1990 and
2003, its members increased their research and development investments in
Europe by 2.6-fold and in the US by fourfold The federation concluded that
this differential was due to multiple factors, such as the economic and
regulatory framework, the science base, the investment conditions, and
societal attitudes towards new technologies”. Interestingly, the Federation
did not find prices as a main factor.

They also calculate the ratio of pharmaceutical spending on research and
development to gross domestic product (% GDP) among 8 OECD countries. Their
findings situate Switzerland as the country that invests the most on R & D
(0.55), followed by Sweden (0.35) and UK (0.32). The US is about at the
median (0.24).

*Europe no less innovative than the US: “*Contrary to claims of American
dominance, pharmaceutical research and development in the US has not
produced more than its proportionate share of new molecular entities. The
US accounts for just under 48% of world sales and spent 49% of the global
total on research and development to discover 45% of the new molecular
entities that were launched on the world market in 2003, less than its
proportionate share. European countries account for 28% of world sales, 36%
of total research and development spending, and 32% of new molecular
entities, more than its proportionate share”

*Misusing economy theory:* “Every student in introductory economics learns
that fixed costs like research do not determine prices. The market sets
prices, implying they are open to free trading like stock prices. Patents,
and especially patent clusters, turn the market into a monopoly, and only a
monopoly can claim that fixed costs determine prices because it can make
that a self fulfilling prophecy. The claim by companies that they have to
set prices at 50-100 times production costs to recover research and
development costs has never been substantiated, because they have never
opened their books to independent public inspection to prove it. What we do
know is that all research and development costs are fully recovered each
year from domestic sales in the UK and Canada at prices that are far lower
than those in the US”.

It is time to stop blaming lower prices to the industry’s inability to
adapt to the new realities of innovation. We all know that the risks of
pharmaceutical research are enormous, but the benefits are enormous as
well. The pharmaceutical industry should explore ways to share their
research efforts and stop wasting billions of dollars competing among each
other. The era of the ‘1 billion pill’ is over. Pharmaceutical companies
should come up with a collaborative approach, working together under the
jurisdiction of several independent organizations, and avoid today’s
overlapping efforts in terms of discovery, development and delivery,
partially liable for prices escalation that societies currently endure.  A
new business model is needed to fix a broken pharmaceutical industry not
willing to change their profiteering conducts for the society’s benefit.

You can find the article here:

Light, Donald W, and Joel Lexchin. 2005. “Foreign free riders and the high
price of US medicines.” *BMJ: British Medical Journal* 331 (7522) (October
22): 958-960.


Rene Soria-Saucedo
Boston University
School of Public Health
Health Policy & Management Department
715 Albany Street, W350
Boston, MA 02118-2526

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