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Contrary to public opinion, the research productivity of U.S. pharmaceutical companies has fallen behind European competition, says Donald Light, visiting professor in human biology and international health policy at Stanford. Light's latest study on the topic, which will be published in Health Affairs, also shows that new drugs often lack clinical advantage over existing ones.

"While it's widely believed that most new drugs are discovered and developed in the United States and that American researchers have far outstripped their European competitors, on a level playing field of dollar for dollar, European researchers actually have been more innovative since 1982," Light said.

By analyzing clinical studies and papers on pharmaceutical discoveries, Light found that European companies discovered more drugs than U.S. companies from 1982 to 2003, overall and in proportion to funding.

Light also cites studies showing that in the last 40 years, only about 11 to 15 percent of new drugs provided significant clinical improvement over existing ones, while the remaining 85 to 89 percent include what are called "me-too" drugs, clones of existing drugs, marketed as the latest breakthrough.

An example is Nexium, a me-too version of Prilosec. "Nexium is a big seller mainly because of marketing, but it has no advantage over Prilosec. Americans somehow believe that a new drug must be better; otherwise it wouldn't have been approved," Light said.

"European buying groups assess new drugs and if the drugs aren't much better, they are not willing to pay much more. That's an incentive to find drugs that are substantially better because they'll get a higher price," he said. "American insurers and Medicare pay high prices regardless of added value."

European pharmaceutical companies are not only producing more, but doing it for less. European patented drug prices run about half the cost in the United States, yet they are sufficient to support a robust research effort, Light said.

If American companies charge double for prescription drugs, where are the extra funds going and why do doctors keep prescribing new drugs that are little better? The answer is marketing, according to Light. "High prices for these new drugs enable companies to spend 2.5 times more on marketing than on R&D to persuade physicians to prescribe them and patients to want them. Thus, current incentives reward better marketing over better value," Light wrote in the paper.

If U.S. pharmaceutical companies emulate their European counterparts by raising productivity and cutting excess marketing, Medicare's "doughnut hole" dilemma could be solved, Light said. The doughnut hole is a gap in Medicare Part D, which fails to cover patients who spend over $2,700 but under $4,350 per year on prescription drugs.

"American prices really do not need to be so high. This could mean substantial savings for Medicare Part D and the ability to fill the doughnut hole," he said.

This research was funded by the Escher Project of Top Institute Pharma at the University of Utrecht, Netherlands. Donald Light is the Lorry Lokey Visiting Professor in Human Biology from the University of Medicine and Dentistry of New Jersey. The research is scheduled to be published online in the Aug. 25 edition of Health Affairs as a Web Exclusive.

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