The pros and cons of a single 'Euro-price' for drugs

Parallel trade in pharmaceuticals has become a major European Union policy issue with several 'solutions' being considered by the European Commission, Member State governments and the pharmaceutical industry in the 'Bangemann Process'. This paper discusses the issues from an economic and public policy perspective--considering the economic cases for differential pricing and for 'Euro-prices', concluding that the economic case for parallel trade--to achieve convergence of prices--is not applicable to pharmaceuticals. It argues that health economic evaluation is not an appropriate tool to set 'Euro-prices' because of differences in clinical practice and in resource use and cost across countries. Pricing rules should reflect local willingness to pay for innovation. It concludes, however, that in the absence of policy changes there is a strong likelihood of companies refusing to supply new innovative products at low prices to traditionally 'low price' countries in order to avoid parallel trade undermining prices obtained elsewhere in Europe, with significant implications for the welfare of patients in those countries.