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us is pot of gold for swiss drug firms

US legislators have failed to rein in galloping pharmaceutical prices swissinfo.ch

The highly unregulated drug market in the United States is one of the few places Switzerland's pharmaceutical companies can still make plenty of money.

This content was published on May 17, 2006 - 09:26

But drug makers are coming under pressure to rein in prices as the cost of healthcare in the US continues its steep upward climb.

"The American market is the most important for any drug company," says Karl-Heinz Koch, an analyst at private bank Lombard Odier Darier Hentsch. "And as the relative price of pharmaceutical products in the US is higher than elsewhere, it is also the most profitable market."

Novartis' pharmaceutical division makes nearly half its sales ($9.6 billion) in the United States and has cornered almost four per cent of the market. For it's rival Roche, North America represented 40 per cent of its drug sales last year.

Geneva-based Serono also relies heavily on this market, with around 36 per cent of its sales ($848.2 million) in this region in 2005.

Many critics say though that there

is no reason for prices to be so high.

"The costs of pharmaceuticals are totally unjustified," says Alex Sugerman-Brozan of the Prescription Access Litigation project in Boston. "The industry claims these costs are due to research and development (R&D), when in fact they spend twice as much on marketing in the US."

Responding to demand

But Richard Frank, a professor of health economics at Harvard University, says drug firms are simply responding to the demands of the market in the US.

"Research and development costs for new drugs are high, there's no

escaping that. But the way the industry is set up in the United States, there is a strong incentive to market your products."

Frank reckons that drug firms should not be blamed for trying to sell their products, which he says has an added benefit.

"Physicians and consumers get information from marketing they would not have the time to gather themselves," he admits. "There have been some excesses, so we need to revisit that, but it would not be desirable for marketing to go away altogether."

But according to Sugerman-Brozan, companies operating in North America have always been more interested in pleasing shareholders

than meeting their patients' needs or innovating.

Bad pitch

He says drugs are also often being promoted to consumers the wrong way.

Xenical, an obesity treatment produced by Roche and marketed by Glaxo SmithKline (GSK) in the US is a typical case.

GSK has asked the Food and Drug Administration to make some forms of Xenical an over-the-counter (non-prescription) drug, an idea Sugerman finds shocking.

"The idea of people self-treating with a weight-loss drug is very dangerous," he told swissinfo.

"It also continues to promote the idea that there is always a pill for whatever ails you."

Sugerman-Brozan says this is a recurring theme within the drug industry, accusing it of virtually inventing new conditions, such as social anxiety disorder.

He admits though that while public opinion is calling for more regulation of the drug market, he believes there is little chance that the industry will be reined in anytime soon.

"The pharmaceutical companies now have the most powerful lobbying operation in Washington," he added. "They have also donated over $800 million to electoral campaigns over the past ten years

and spent an equal amount on lobbying."

According to the Washington-based Center for Public Integrity, Novartis spent $18 million on political lobbying between 1998 and 2004, while Roche's outlay was almost the same. Serono's efforts over the same period were worth just under $1.9 million.

swissinfo, Scott Capper in Boston

In brief

The United States is the world's largest pharmaceutical market, accounting for around 48% of the world total.

Per capita expenditure on drugs was $885 (SFr...)in 2005, nearly double the level found in the rest of the world.

The US does not regulate drug prices, and this is causing increased difficulties for those on moderate incomes who do not qualify for state benefits.

In an attempt to deal with this problem, Medicare is incorporating a prescription drug benefit for people 65 and over.

Attention has focused recently on parallel importing cheaper drugs from abroad, notably Canada, although this is technically illegal.

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Key facts

Top pharmaceutical companies worldwide (2004):

1. Pfizer
2. GlaxoSmithKline
3. Sanofi-Aventis
4. Johnson & Johnson
5. Merck
6. AstraZeneca
7. Novartis
8. Bristol-Myers Squibb
9. Wyeth
10. Abbott Labs
12. Roche
33. Serono

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