Why does Humira cost less in Europe?
‘Socialized medicine’ fosters more competition than US approach
POLITICIANS FREQUENTLY TALK about doing something to address the high cost of pharmaceuticals. President Trump has made especially loud promises that he would lower drug prices “really, really substantially.” On October 15 the administration announced an “historic proposal” intended to accomplish Trump’s goal. A new rule would require manufacturers to disclose drug prices in any TV commercials they use to advertise their products. The proposal was widely recognized as superficial and unlikely to have any real impact on drug costs.
Perhaps that is why Trump gave another speech on Thursday in which he made a different proposal and upped the ante to “a revolutionary change.” This one purports to go after the “global freeloading” that he claimed causes drug prices in the United States to be dramatically higher than elsewhere. The proposed policy will generate pre-election headlines. If it is implemented, which is uncertain, it will constitute a pilot program benefiting a fraction of Medicare recipients from 2020 to 2025.
Notwithstanding Trump’s inflammatory and inaccurate claims about “freeloading,” there are lessons we can learn from other countries about how to control drug prices. In late September, there was a striking example of a coherent approach to lowering drug prices when the European Commission approved a fifth biosimilar drug to compete with Humira, one of the world’s most expensive and best-selling pharmaceuticals. Starting this month Humira, which treats rheumatoid arthritis and similar conditions, will have multiple competitors in the EU countries.
The competitors are expected to drive the costs of the medication significantly lower in Europe even though Humira is already much less expensive there than in the United States. Earlier this year the New York Times reported that a typical two-syringe package costs $2,669 in the United States as compared to $1,362 in Britain and even less elsewhere in Europe. The current lower prices exist because of more effective purchasing power by European payers. Those price disparities are about to get even bigger because of more competition.
Development of a patent thicket is an attempt by a company to extend its original patent protection by seeking new patents for small changes of the product. Pharmaceutical companies base such claims on modifications such as turning a pill into a capsule or producing a once-a-day dosage instead of a twice-a-day version. AbbVie has filed for more than 100 US patents on Humira, creating the basis for protracted legal disputes even though the underlying drug hasn’t changed. This complex litigation strategy has effectively delayed the introduction of Amgen’s competitor as well as biosimilars produced by other manufacturers.
Europe also has strong patent laws but the European Commission, after investigating the matter, issued rules to preclude pharmaceutical companies from abusing those laws “to prolong market-exclusivity and other anti-competitive strategies that result in high prices.” No such rules exist in the United States and that’s why Humira users in the United States will continue to pay dramatically higher prices than European patients for years to come.
The exploitation of patients and patents provides a huge benefit to AbbVie’s shareholders and executives. The CEO made $22.6 million in 2017. The company’s most recent SEC filing shows three-month revenue of $8.27 billion, of which $5.18 billion came from Humira alone. After all manufacturing, research, administrative, and tax expenses, the company reported adjusted net earnings of $3.16 billion for the quarter, a profit margin of 39 percent. Because approximately one-third of Humira is sold overseas at lower prices, the domestic sales produce an even higher profit margin. That means that nearly 50 cents of every dollar spent on Humira in this country is dropping to AbbVie’s bottom line.Even though the healthcare systems in western Europe vary considerably from country to country, they are routinely dismissed as “socialized medicine” in policy debates here. Some of those countries are more socialized than others, but what they have in common is that virtually everyone is covered, the outcomes are good, and the costs are significantly lower than ours. The dramatic and sustained variance in price between the US and the EU for an important drug such as Humira is another example of how our healthcare system serves corporate interests more than it serves patient interests. We don’t have to “socialize” our healthcare, but we do need to learn from Europe how better to balance corporate priorities with access to care.
Edward M. Murphy worked in state government from 1979-1995, serving as the commissioner of the Department of Youth Services, commissioner of the Department of Mental Health, and executive director of the Health and Educational Facilities Authority. He recently retired as CEO and chairman of one of the country’s largest providers of services to people with disabilities.