The battle over European drug pricing
A clash between drugmakers and UK and EU governments over drug pricing is coming to a head. The head of Bayer’s drugs business warned this week the German company was shifting its pharmaceutical arm’s focus to the US, and away from Britain and European countries that were making “big mistakes” in managing health budgets. AbbVie and Eli Lilly became the first drug groups to pull out of a voluntary UK pricing agreement they said punished innovation. Governments cannot simply bow to corporate browbeating. But they must balance the need to restrain health costs with their ambitions to lure life sciences investment.
Drug companies are irked by big clawback payments they are facing after drugs spending bust healthcare budgets in the past couple of years — in large part due to Covid-19 and the post-lockdown demand surge. This is reducing net prices for pharma groups’ products even as they grapple with cost inflation — and when life sciences ingenuity produced the vaccines that tamed Covid.
There is annoyance that the UK is sticking firm to a voluntary cap agreed from 2019 that limited growth of the NHS bill for branded medicines to 2 per cent a year, however much it buys. If growth in the bill exceeds the cap, drugmakers pay back the extra. Pharma groups say this was never designed to cover a once-in-a-century health emergency; this year they will have to pay back £3.3bn, or 26.5 per cent of sales — up from 5 per cent two years ago.
This story originally appeared on: Financial Times - Author:The editorial board
