Foreign free riders and the high price of US medicines

doi:10.1136/bmj.331.7522.958

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Donald W Light, professor (dlight@princeton.edu)1,
Joel Lexchin2

¹Department of Psychiatry, University of Medicine and Dentistry of New Jersey, 40E Laurel Road, Stratford, NJ 08084, USA
² School of Health Policy and Management, York University, Toronto ON, Canada

Correspondence to: D W Light

Accepted 26 July 2005

The US government, backed by the pharmaceutical industry, wants to convince Americans that they're paying more for drugs because they're contributing more than their fair share of the costs of research and development. Not so, argue two researchers who have looked at the evidence.

Introduction

The United States government is engaged in a campaign to characterise other industrialised countries as free riding on high US pharmaceutical prices and innovation in new drugs.1 This campaign is based on the argument that lower prices imposed by price controls in other affluent countries do not pay for research and development costs, so that Americans have to pay the research costs through higher prices in order to keep supplying the world with new drugs.1 2 Supporters of the campaign have characterised the situation as a foreign rip-off.3 We can find no evidence to support these and related claims, and we present evidence to the contrary. Furthermore, we explain why the claims themselves contradict the economic nature of the pharmaceutical industry.

Origins of the campaign

The campaign, strongly backed by the pharmaceutical industry, seems to have started in the late 1990s as a response to a grass roots movement started by senior citizens against the high prices of essential prescription drugs.4 This issue was the most prominent one for both parties in the 2000 elections and has since been fuelled by a series of independent reports documenting that US drug prices are much higher than those in other affluent countries.5^–7 The idea that other countries are exploiting the US has led to a hearing of the US Senate Committee on Health, Education, Labor and Pensions and was behind a Department of Commerce report that strongly advocated that other developed countries raise prices on patented medicines.8 But are higher prices really necessary?