expected to limit profits to a 21 per cent return on capital. Prices, supposedly, can only be increased
if profits fall below a certain level. But profits can be increased
if money is invested in research and development in the UK.
In France, the government sets an annual ceiling on total drug expenditure
and if, it is exceeded, the drug companies have to make payments to cover
the shortfall. In Italy, prices are limited to the average charged in
12 other European countries.
The drug companies are not always happy at what they see as restrictive
European regulations. At the end of last year, Pfizer (which produces
Viagra) was reported as putting pressure on the French government to change
its drug pricing policy. The company argues that high prices support research,
and that the public health systems in Europe are holding back innovation
by haggling over the cost of new drugs. Pfizer is in talks with the French
government arguing that prices are too low, and is trying to get support
for its stand from other companies such as GSK and Eli Lilly.
In the US, it takes seven to 10 years to develop a new drug, at an average
cost of $500 million. Not all drugs get to be licensed, and the cost of
failures has to be borne by the successes. Only about three out of every
20 approved drugs earn the companies enough to cover the costs of development.
It's a commercial business. Richer countries may also have to accept that
they will have to subsidise cheaper drugs for the developing world, where
HIV is out of control, if 'treatment access' is to mean anything.
According to Girish Tyagi, drugs analyst of Dutch-based bank ABN AMRO,
France
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is seen as the 'leader of the pack in Europe', with five per cent of the total
