"Pharma" Industry Needs To Address Pricing Disparities
The pharmaceutical industry must take the lead in addressing the disparity in drug prices between the U.S. and other developed nations, or face the potential of government price controls and an increased level of drug imports, according to "Progressions: Global Pharmaceutical Report 2004."
The report, issued by Ernst & Young, noted, "recent expansion of the U.S. market under the Medicare Modernization Act is likely to accelerate pricing pressures throughout the industry globally."
Rather than oppose price control and reimportation at the risk of consumer backlash, the report challenged the U.S. pharmaceutical industry "to take the lead in a fresh two-part approach, one that is coordinated and future oriented. First, it must address drug prices and geographic price discrepancies. Second, the industry must communicate more effectively with all stakeholders to reestablish its credibility in the health care arena."
Blake Devitt, senior pharmaceutical practice leader for Ernst & Young, noted that government price controls would result in a substantial setback for industry profit margins as well as potential innovations.
A report issued this year by Alan Sager, Ph.D., and Deborah Socolar, M.P.H., of the Boston University School of Public Health, provided a financial overview of the rising cost of drugs in the U.S. The report noted that spending on prescription drugs in the U.S. will approach $250 billion in 2004. "It has doubled every five years since 1994, rising more than twice as fast as the rest of health spending during (the) decade from 1994 to 2004. During these years, prescription drug spending has grown 4.5 times as fast as the economy as a whole."
Kathy Smith, Ernst & Young's new pharmaceutical practice leader, questioned if pharmaceutical company executives are doing enough to emphasize their own risk management and compliance efforts. "For most pharma companies, where innovation, manufacturing, and commercialization are natural points of focus, fostering a culture of risk management and compliance to the formula can only make the industry stronger. Furthermore, a strong culture of compliance goes a long way towards strengthening the public's trust in the industry."
