The Truth About Free-Riders

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The latest issue of the British Medical Journal has an excellent article on American drug companies. To put this in context, recall that of late, the pharmaceutical industry has been lobbying the U.S. government to sign “free” trade deals with other countries that would: raise prices on patented drugs; extend patent protection to delay the introduction of generics; and block “re-importation” to the United States. Why would they do such a thing? Because, says Big Pharma, the rest of the world hasn’t been paying its “fair share” of research expenditures, and it’s time for them to stop free-riding. Which brings us to the BMJ article, which basically screams “Liar!”

The United States government is engaged in a campaign to characterise other industrialised countries as free riding on high US pharmaceutical prices and innovation in new drugs…

The campaign, strongly backed by the pharmaceutical industry, seems to have started in the late 1990s as a response to a grass roots movement started by senior citizens against the high prices of essential prescription drugs. This issue was the most prominent one for both parties in the 2000 elections and has since been fuelled by a series of independent reports documenting that US drug prices are much higher than those in other affluent countries…

We can find no convincing evidence to support the view that the lower prices in affluent countries outside the United States do not pay for research and development costs. The latest report from the UK Pharmaceutical Price Regulation Scheme documents that drug companies in the United Kingdom invest proportionately more of their revenues from domestic sales in research and development than do companies in the US.

Prices in the UK are much lower than those in the US yet profits remain robust. Companies in other countries also fully recover their research and development costs, maintain high profits, and sell drugs at substantially lower prices than in the US.

Interestingly, the U.S. pharmaceutical industry’s claim that European countries “free ride” seems to be based primarily on a 2004 report produced by Bain & Company, a consulting group in Boston. (The AARP passed it widely around.) But that report doesn’t provide any evidence for its claim that “innovative drugs” are somehow less available in Europe as a result of overly-low prices. Perhaps American pharmaceutical companies aren’t marketing their absolute latest and flashiest patented drugs in Europe, true. But considering how many of these are “me-too” drugs with little to no significant medical benefit, perhaps it’s no surprise that Europeans aren’t suffering much for the loss.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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