Many of my recent posts have dealt with the high cost of prescription drugs, drug reimportation from Canada, and pressures on U.S. based pharmaceutical companies to do something about it.

Jim Gilbert and Paul Rosenberg of Bain & Company recently addressed the World Forum at Davos, speaking on the topic of innovation divide. Specifically, Gilbert and Rosenberg talked about “Imbalanced Innovation in the Pharmaceutical Industry”, comparing Europe’s monetary contributions to pharmaceutical R&D with that of American companies.

“Europe seems to be in an enviable position. It spends 60% less per capita on pharmaceuticals than the US does - a gap that has roughly doubled since 1992. That trend has translated into major European savings: if Europe’s pharmaceutical spending per capita had matched the level of the US, Europe would have spent an additional $160B in 2002 and $840B cumulatively over the preceding decade. European governments are largely responsible for these cost differences. European regulations, which vary by market, have led to prices 25-35% lower than US prices for comparable drugs, while utilization rates for new drugs are 30% lower per capita than in the US.”

“Clearly, the “free rider” model creates direct, visible benefits for Europeans. The costs of the model to Europe, however, are equally real. They include less drug innovation; fewer high value-added jobs; loss of corporate research centers; and higher morbidity and mortality from diseases that could be treated with innovative drugs - if they were more readily available in Europe.”

There’s more in the article, but let me inject here some thoughts. Is Gilbert and Rosenberg’s decidedly long-term view really going to change anybody’s position over in Europe? Isn’t it always “Buy now, pay later?”

And although it is reasonable to assume that timely access to life-saving drugs can cut down on morbidity: what if European consumers (and their physicians) don’t know about these new drugs, and simply go about their business as usual? I somehow find it hard to believe that Europeans, given a choice, would collectively opt to pay more for universal access to cutting-edge prescription drugs vs. keeping their low monthly health insurance premium.

I have the suspicion that governments - on both sides of the Atlantic - will choose to solve this problem on the backs of the most convenient target…

Download Bain PDF article.