What kinds of policies helped the US surpass Great Britain to become the world’s center of pharmaceutical innovation?
I think it was a combination of shrewd reforms on the part of the United States, and self-destructive reforms on the part of Europe and other developed nations. In the 1970s, Europe was the global hub for pharmaceutical innovation. However, by 2004, every European nation including the United Kingdom had price controls on prescription drugs. These price controls have resulted in the demise of pharmaceutical research and development in Europe and the United Kingdom.
The United States leads the world in drug innovation today. Roughly two-thirds of the new drugs that have come to market in the last decade originated in the United States. Drug firms have moved their research and development infrastructure from Europe to the United States.
Here in the United States, the Bayh-Dole Act was absolutely critical. The 1980 law created a process for translating academic medical research into FDA-approved treatments. It did so mostly by granting universities the ability to license IP developed in their labs to private companies.
This reform came along around the time when more and more European countries were embracing government-run health care — and implementing aggressive restrictions on the price of medications in the process.
And so, at a moment when America was developing a way of harnessing market forces to promote drug innovation, Europe was doing precisely the opposite. And the result was that the United States took a decisive lead in drug development.
The United Kingdom might finally be realizing the error of its ways — and potentially increasing access to novel drugs in the process. On December 1, Britain struck a trade deal with the United States that will effectively require Britain to spend 25% more on new medicines. It will also lower the level of rebates it demands from pharmaceutical companies. In exchange, the United States will hold off on implementing tariffs on British pharmaceuticals and on taking future actions against British pharmaceutical pricing practices for the three years remaining in President Trump’s second term.
Several high-profile pharmaceutical companies, including Astra-Zeneca and Merck, have put billions of dollars in investment in the United Kingdom on hold this year. British leaders are clearly trying to bring that investment back in order to stimulate their moribund economy.
Sally C. Pipes is the president, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute.
