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PHARMA: Pay me more money or I’m moving my operations off-planet!

So poor impoverished Sir Tom McKillop, CEO of Astra-Zeneca, a man knighted for his services to British industry, is upset.  Now just because his main achievement in life is to replace one purple pill with another that is more or less identical but continues to be patent protected, doesn’t mean you shouldn’t hear him out.  Apparently those pesky Europeans are not paying enough for their drugs, and that has forced, forced, innocent European drug makers to move all their R&D operations out of Europe to the US. I’m frankly a little curious as to why this has happened,and why all research into pharmaceuticals in Europe has stopped — even if it’s true (which it probably isn’t). After all you can do the research for a product anywhere and sell it anywhere, and most research is done by teams in multiple countries anyway. Quite what the connection is between when a product is developed and where it’s sold is beyond me. McDonalds sells millions of cheeseburgers a year in Japan and China, but the hamburger was invented in the good old US of A (or Germany–take your pick).

But let’s give Sir Tom his due. He says that AZ sorta moved its research out of Europe to America because America pays the highest price for drugs.  This allegedly encourages innovation, although one might point out that plenty of innovation has come from companies developing products outside of the US aimed at the American market. Tom may himself have heard of Sony, Toyota or even Glaxo–all of whom have had a bit of success here with stuff invented and built there.

But no matter, here’s the next logical leap. If those pesky American politicians want to import drugs from Canada, just the way those pesky Brits and Germans did parallel imports from Spain and Greece, then gawdammit, we’re moving all our research shops to India and China! Well hang on a sec. Ignoring the fact that imports from Canada are less than $2bn of a $240bn US drug market, isn’t the innovation that makes research here so vibrant due to the high prices for drugs here?  And now the innovation is all going to move to China and India presumably because the price of drugs is going to be higher there, after ours here come crashing down to Canadian levels. Given average spending on drugs here is roughly $1,000 per head per year which is not a lot less than average GDP per capita there, someone better quickly tell the Chinese and Indian governments that they need to quickly increase the price of drugs in those countries to what is effectively the point that the entire national income is spent on pharmaceuticals!  That would please Sir Tom.

On the other hand, perhaps it’s not the price of drugs that would encourage Sir Tom to move his research shop to India or chin.  Perhaps it’s the price of PhD research slaves? On the other hand, after he’s moved his R&D to India and China, surely Jupiter or Mars will raise drug prices to tempt him there?

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gadfly
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gadfly

I just read an old article in Wired about how the IT sector has passed the entrepreneurial innovative stage, and the game now is to manipulate the market instead of make a better product. This made me think of health care, and more specifically pharma. On the one hand, pharma prices are justified as incentives to innovation. Now that I think about it, this is how Kaiser justified its pitch for federal EMR funding as well: no technical “innovation” without a cash windfall. On the other hand, nothing distinguishes health care from one place to the next: a physician only… Read more »

Anjali
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Sweet. enjoying the sarcasm. And thanks for showing us that the logic just don’t hold :>
And i enjoyed this line the most:
“Now just because his main achievement in life is to replace one purple pill with another that is more or less identical but continues to be patent protected, doesn’t mean you shouldn’t hear him out.”

Linkmeister
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Tsk. Sarcasm doesn’t become you, Matthew. 😉

matt
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matt

“someone better quickly tell the Chinese and Indian governments that they need to quickly increase the price of drugs in those countries to what is effectively the point that the entire national income is spent on pharmaceuticals!”
That’s not too far from the case for the US gov’t (healthcare = ~1/7 GDP)and healthcare costs… or GM for that matter.