Ernst & Young on pharma re-imports, pricing
disparity between countries if it is to avoid having the matter
taken out of its hands by government-mandated price cuts and
parallel imports.
Companies should try to level the prices between countries, rather than wasting resources on opposing price control and re-importation initiatives, according to Blake Devitt, senior pharmaceutical practice leader at Ernst & Young.
His assertions come in the wake of a series of initiatives by the drug industry aimed at limiting cross-border trade in pharmaceuticals, both in North America and in Europe.
Devitt makes his points in a new study released by Ernst & Young called Progressions: Global Pharmaceutical Report 2004.
"In spite of a concerted effort by the industry to improve perceptions by demonstrating the benefits of pharmaceutical products, few stakeholder groups appear satisfied," claims the report.
"Wall Street remains jittery; the public and payors perceive the price of drugs as too high, and scrutiny over regulatory compliance continues to increase," it continues.
Noting that the average medicine in 2002 cost about 77 per cent more in the US than in Canada, the UK, Germany, France, Italy, Sweden and Switzerland, Ernst & Young said that price controls in drugs in the US are almost inevitable. The US is the only developed nation in the world with no price controls on drugs, it points out.
Meanwhile, it is an oft-reported fact that R&D productivity is under pressure, and the introduction of innovative drugs has slowed in recent years. On this point, Ernst & Young is more optimistic, suggesting that improvements in early stage pipelines are on the horizon, as investments in new drug discovery technologies over the last few years have started to take off.
Companies have made progress allaying international tension over access to certain essential medicines in developing countries, it adds, but pharma remains a convenient target for policymakers and the public.
"Rather than merely continuing to oppose price control and re-importation initiatives at the certain risk of consumer backlash, the pharmaceutical industry is challenged to take the lead in a fresh two-part approach, one that is coordinated and future oriented," says Devitt.
"First, it must address drug prices and geographic price discrepancies. Second, the industry must communicate more effectively with all stakeholders to re-establish its credibility in the health care arena."
The report coincides with another study that finds that the reputation of the drug industry is at a real low. A Harris Interactive survey just published in the US finds that 44 per cent of respondents consider that the drug industry is doing a good job for their consumers, with 48 per cent in the opposing camp. The proportion of those seeing the industry in a positive light has fallen steadily year-by-year from a height of 79 per cent in 1997.
Meanwhile, Alfred Mueller, health sciences practice leader of Ernst & Young Germany, and Siegfried Bialojan, the German firm's pharmaceutical practice leader, point out in the report that even in countries considered innovation friendly, such as the US, policy dynamics can change rapidly either to improve or erode incentives for innovation.
"Many companies are confronted by a value crisis as they try to sustain a business model based on high costs of manufacturing, R&D, marketing and sales, increasing regulatory scrutiny and reimbursement pressures," they comment.
Countries that can combine lower cost manufacturing with adequate regulatory protection of intellectual property are well positioned to attract large pharmaceutical companies. India is a prime example, they say.
