Angered by the moves European nations are taking to cut drug prices, one big drugmaker commissioned a study that finds - guess what? - price cuts will severely reduce the number of new meds making it to market. The study was undertaken by the European School of Management and Technology's Competition Analysis and funded by Novartis.
The Berlin-based group claims to have modeled and quantified a "direct link between strict regulation and low innovation." And the new meds that are likely to be "hit hardest under tough pricing regulation" include drugs for treating heart disease, multiple sclerosis and chronic meningitis, as well as antibiotics.
"Our study shows the consequences that pricing and reimbursement regulation can have on pharmaceutical innovation," Hans Friederiszick of ESMT CA says in a statement. "It also shows that, incorrectly applied, regulation can reduce the value of pharmaceutical projects and curtail the resources available to carry them out." Here is the complete report.
The group argues that External Price Benchmarking (EPB), which it says is used in OECD countries, causes a 5.7 percent drop in the "optimal pharmaceutical portfolio value" of a typical drugmaker in its simuation. And Internal Reference Pricing (IRP), which is used in 17 EU-member and 3 non-EU OECD countries, causes an 11.7 percent drop. "Having some regions of the world under IRP and others under EPB magnifies the problem, since internal prices are then exported to external markets, leading to a 19.8 percent drop in portfolio value, according to ESMT.
Many European governments, as you know, are slashing prices (see here and here), and some drugmakers are trying to fight back by withdrawing products, as Novo Nordisk did recently before reaching a compromise (see this). Earlier this week, for instance, Germany's government approved a draft bill that would save up to $2.4 billion annually by forcing drugmakers to negotiate prices (look here).