29 June 2007

Pharmaceutical Innovation--Squeezing the Last Bastions

For several years, analysts have warned about the decline in innovation in the pharmaceutical industry. When profits of drug companies are held artificially low by government regulation, there will be less money available for R&D.
# For over 100 years, Europe has been a powerhouse of pharmaceutical progress and innovation. Over the last decade, however, Europe has gradually lost its leadership in the pharmaceutical sector, with a steady transfer of its R&D to the US - where policies and market conditions are more favourable to pharmaceutical innovation.
# Key benchmarking indicators show that between 1990 and 2002, R&D investment in United States rose more than fivefold, while in Europe it only grew 2.5 times.
# In 1990, major European research-based companies spent 73% of their worldwide R&D expenditure on the EU territory. In 1999, they spent only 59% on the EU territory. The USA was the main beneficiary of this transfer of R&D activity.
# The latest data on new molecular entities (period 2001-2005) show the predominance of the US which has now become the leading inventor of new molecules in the world (61 against 51 for Europe)
# The top 20 companies worldwide shows the leadership of US companies. In 2005, nine (9) of the top 20 pharmaceutical companies in the world are of American origin (against 8 for Europe).
# US companies significantly increased their share in the world's top selling medicines. On the top 30 worldwide products in 2005, 21 originate from the US against 8 from Europe.
# US companies are more successful in disseminating their new medicines at international level: 70% of the sales of new medicines launched on the world markets during the period 1998-2002 were made in the US, compared to only 18 % in Europe.
# Whereas the European pharmaceutical market was still the world's largest market in 1990 (representing 37.8% of the world market), it now only represents 30% of the world market (compared to 47 % for the North American market).

There is much more at the source above. Andrew Sullivan and Kevin Drum have been sparring about this issue recently. The basic gist of their argument is that Sullivan wants to keep US politicians from recapitulating the failures in Europe. Drum seems to want to copy Europe's approach exactly.

Government regulations and controls often bring many adverse consequences to a financial market or industry. For those who are committed to ever increasing government control over the marketplace, these adverse consequences are easily ignored and denied.

Economies are like biological ecosystems. It is easy to "overcontrol" an ecosystem, resulting in loss of vitality and diversity. The same is true in economic systems.

Socialists will never understand the issue, because ever increasing control of society is a socialist's lifeblood. For Europe, it may be too late. For most of the Anglosphere, there may still be some time.

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“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell

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