The "Myth" of the European Single Market

The European single market in pharmaceuticals is a myth, and the reality is 15 social security systems fiercely guarding their sovereignty in price-setting, and currency fluctuations leading to ever-higher price discrepancies, Thomas Cueni, secretary-general of Interpharma and executive director of Pharmaceutical Partners for Better healthcare, told ICBI's PharmEcon Europe 95 meeting in Paris this month (Marketletter July 17). And through parallel imports P-Is), this situation is leading to a dynamic downward pressure on prices. "This situation must be addressed if we want to maintain a strong research base in Europe," he said.

Economically, we are no more advanced than 10 years ago, he said. We are still confronted with highly fragmented social security systems whose differences have been increased by the turbulence of the currency markets. There is still an inherent tension between each member state wanting to control its drugs bill and the interest of the European Commission in maintaining a strong research-based industry in Europe. Reconciling these conflicts is a daunting challenge.

P-Is Are A Trade Distortion Caused By Govt Cost Curbs We have 15 social security systems and 15 national currencies, but still insist on a free flow of goods, he said. In a free-market environment, such trade would be rare or non-existent, but medicines are a special case. First, parallel trade is not due to market arbitrage but is a trade distortion produced by government price controls. Second, due to medicines' special nature, manufacturers may not be free to withdraw them from a market where prices have been eroded through controls, inflation and currency devaluation. Third, parallel trade undermines patent protection because it exposes patented drugs to other countries' arbitrary price controls through the back door, and amplifies the effect of currency erosion without letting manufacturers adjust prices in line with competitive market forces.