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European drug pricing and its
implications
By group 2
Sankalp
Himanshu
Soumyajit
tanviraj
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Low drug prices in European Union
Huge variation inprices ofmedicines as
compared to US. Savings of $160
billion for Europein 2002.
Cumulative savingsof $1trillion from1992.
Lipitor price inparis-60 cents,price in us-
$3.98. Tamoxifen-$360
in us,$60 Germany.
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Low pricing -a bane
Big savings wereapparentlylucrative.
Paying a heavyprice in the longrun
Price control
resulted in 25-30% Lower prices
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US captivating drug market
High drug prices inus made it moreattractive market
Big pharmaceuticalcompanies shifted
to us.
Competitive positionof Europe declinedas compared to US
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European govt- monopsony
European govt had been monopsonistprice setters.
Public health was under the govt. In monopsony market there will be
only one buyer and many sellers.
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Health care models-EU
Comprehensivesocial insurance-public and privatefunding.
Hospitals & drugproviders got thedues repaid fromgovt.
Followed by-Germany,France,Switzerland
National healthservices-funded bypublic.
NHS UKfundedthrough taxpayersmoney & privatehealth insurance.
Followed by-UK,Sweden,Italy.
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Between 1990-2000 Europeannations spent
7.7% of total GDPon health caresystems.
Different kinds of
drug price controlsfor public healthcare systems.
Reference pricing
Profit regulation
Product price
controls
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Reference pricing
the patient has to bear thedifference that exceeded thereimbursement level by the govt.
Germany and the Netherlands -1st
to adopt.
Breakthrough drugs were excluded .
Sweden and Denmark also followedthis system
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Profit regulation & profit pricing
Govt. controlledthe max profit acompany couldgenerate.
Spain-18% max
profit UK-21% max
profit
Prices determinedby comparing prices
with referencecountries.
Greece-minimumprice fromneighbouring country
Czech republic-lowest price asmaximum price
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Implications of low drug prices
Decreased level of R&D spending. Lower revenues & lower profits for
companies.
Companies Migrated to US for R&DDue to the low IRR in europe. $14.8 billion invested for R&D in
Europe $20.9 billion by US in 2000. In further years it was $20billion v/s
$30 billion
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ROI in 1992
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
revenue profit
ROWEurope
U.S.
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IRR in 2002
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
revenue profit
ROWEurope
U.S.
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Loss of jobs inEurope
British drug co.
GlaxoSmithKlinemoved its R&D toAtlanta
Britain lost 65000
jobs in 2001
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Savings=losses
In 2002 Germanysaved $19 billion.
LOST $4billion on
patents and otherR&D relatedbenefits.
$8billion on R&Djobs.
$3billion in termsof profits thatfirms could haveearned.
$2billion-sheddingcorporate HQ.
$5biilion poorerpublic health.
$3billion-bargainto lower its drugprices
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cheaper & inaccessible drugs
Health care systems relied oncheaper,older,less effective drugs.
New & Lifesaving medicines notaccessible .
Entry of new drug delayed by 18months-negotiations over pricing.
Taxol a cancer treatment drugavailable in Britain after 5 years ofits approval in 1995.
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Current scenario
Greece, Spain and Germany slashingthe price their healthcare systemspay for medicines.
Europe accounted for 30.6%of globaldrug sales in 2010, against 39.8% inAmerica.
Novartis,Johnson &Johnson,GlaxoSmithkline areconcerned about the acceleratingprice erosion by EU
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