European drug prices to be slashed stifling the development of new medicines and resulting in thousands of job losses.

Drug companies are expecting further price reductions to be enforced across Europe in the next 18 months.

European governments have started to introduce austerity measures in a trend that looks likely to continue in to 2011.

Greece

The most drastic austerity measures of any European country but this could have consequences across the region considering the affects of reference pricing and parallel imports.  Drug prices have been cut between 20-27%.

I previously mentioned the situation in Greece in an earlier blog entry

Germany

Pharmaceutical companies have historically been able to set their own prices in German leading to some of the highest across Europe.  The German government has proposed legislation to force drug prices based on a set cost-effectiveness criteria.

A price cap for patented drugs has also been introduced.  These measures aim to reduce prices potentially save the German healthcare system around 2 billion euros a year.

Germany is the third largest drug market and as it is a reference market for drug prices in many European Union (EU) member states this could lead to price reductions across Europe

Italy

The price of off-patent generic drugs has been cut by 12.5% for the remainder of the year.  In 2011 tenders will be introduced with the health system only allowed to buy products at the cheapest bid.  The measures could amount to savings of 600 million euros ($733.8 million)

Spain

The government has announced plans to cut the prices of patented prescription drugs by up to 23%.  This could equate to savings of roughly 1.3 billion euros ($1.6 billion).  The price paid by the government for generics has also been reduced by 25%.

France

The French public health insurer CNAMTS (Caisse Nationale d’Assurance-Maladie des Travailleurs Salaries) has recommended 21 cost-containment measures aimed at bringing savings of 2.2 billion euros ($2.77 billion) and limiting health care spending growth to 2.9% in 2011.

A study conducted by European School of Management and Technology (ESMT) concludes:

‘Cutting pharmaceutical prices will severely reduce the number of new medications making it to market.’

The study on ‘Pharmaceutical Innovation and Pricing Regulation’ identifies a direct link between strict regulation and low innovation.

Dr. Hans W. Friederiszick of ESMT CA quotes:

‘Our study shows the consequences that pricing and reimbursement regulation can have on pharmaceutical innovation. It also shows that, incorrectly applied, regulation can reduce the value of pharmaceutical projects and curtail the resources available to carry them out. Rational investors will naturally look for the most profitable investment choices, which is why regulation has a direct impact on the number and characteristics of the medications developed.’

The forced reduction in prices caused by imposed austerity measures by Governments across Europe is going to lower the return on investment.  We have already seen Big Pharma companies ‘pull out’ of R&D in some disease areas as their margins have been further squeezed and this is likely to continue.  http://www.emedcareers.com/pipeline/2010/03/03/depressing-news/

The result has been closure of research sites causing mass redundancies and less clinical trial being conducted.  Although there are a significant number or phase III trials current being conducted the lack of early phase trials entering the system is worrying.  We have certainly seen a reduction in the number of roles in Clinical Research advertised on the site.