ITC examines price comparisons

April 1, 2001

Pharmaceutical Representative

Fair price comparisons between pharmaceuticals sold in foreign countries and those sold in the United States may not be possible, according to a new report from the Federal Trade Commission. The study, conducted at the request of the House Ways and Means Committee, reveals how drug prices are established, the role of compulsory licensing in setting prices and a description of the costs associated with the development of prescription drugs in Canada, France, Germany, Italy, Japan, Mexico, Russia and the United Kingdom.

Fair price comparisons between pharmaceuticals sold in foreign countries and those sold in the United States may not be possible, according to a new report from the Federal Trade Commission. The study, conducted at the request of the House Ways and Means Committee, reveals how drug prices are established, the role of compulsory licensing in setting prices and a description of the costs associated with the development of prescription drugs in Canada, France, Germany, Italy, Japan, Mexico, Russia and the United Kingdom.

The report stated that: "The large variety of pharmaceutical products, different medical practices and patterns of use among countries and different classes of purchasers within countries make international price comparisons difficult."

Jeff Trewhitt, spokesman for the Washington-based Pharmaceutical Research and Manufacturers of America, said the organization was somewhat vindicated by the findings. "This International Trade Commission report confirms what we have been asserting for some time now," Trewhitt said. "It's a good feeling to know that an independent government agency after a thoughtful study concurs with our findings. Whenever you have critics trying to make [the pricing issue] simplistic and cut and dried and black and white, they do a disservice to the journalists they are talking to and ultimately to the readers."

Though the report said that "a single definitive and unbiased measure of comprehensive price differences does not exist," the ITC did single out marketing costs as one factor that weighed negatively in pricing decisions in the United States. "Several factors are involved in the pricing of pharmaceutical products, including, among other things, costs of production, costs of regulation, profit and perceived therapeutic value," read the report. "Promotional spending, especially in the United States, also plays a role in pricing decisions."

"That is a legitimate cost of doing business," Trewhitt said. "It's still less than research. If you look at all aspects of advertising and marketing, the total in 1999 was $13.9 billion compared to $24 billion for research, so research remains the predominant factor." PR