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Imbalanced Innovation: The High Cost of Europe's "Free Ride"

Executive Summary

By keeping pharmaceutical prices and utilization artificially low, Europe is losing more economically than it gains. Lower drug prices and utilization for Europeans entail other costs , which are difficult to quantify but real, in terms of local industry competitiveness and health outcomes. Indeed, pharmaceutical industry investment and associated innovation has followed the money as the profit pool has shifted to the US, which now represents 62% of the industry's global returns compared with 18% for Europe. If current trends hold, Americans will spend four times as much on drugs per capita as Europeans by 2012. This will drive US R&D investments to double the size of those in Europe, compared with parity today, and will increase the focus on the US for initial drug launches. Pharmaceutical companies need to collaborate on solutions, as they have done in the US, focusing on working with a range of constituents to push governments to improve R&D and other investment incentives in Europe.
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