Bitter pill that comes with having large drugs sector

ANALYSIS:The pharmaceutical industry’s lobbying of the Government demonstrates how multinationals play governments off each other and limit political choices

The nature of the lobbying of Taoiseach Enda Kenny by the pharmaceutical industry, as disclosed in this newspaper during the week, illustrates the power of the industry, and of the multinational sector generally.

The series of letters from senior figures in the world’s largest pharmaceutical companies appeared co-ordinated and included references to meetings the writers had had with the Taoiseach to discuss their concerns.

They also referred to Ireland’s upcoming presidency of the European Union and topics of interest in that regard, including the pricing of drugs in countries that are the subject of troika programmes.

The conflation in the letters of the sector’s commercial objectives with its importance to the Irish economy illustrated how Ireland’s success in attracting multinational investment can affect the role it plays in the globalised world.

Because globalisation has raced ahead of political control, multinationals play countries off each other, seeking concessions everywhere they go. Governments, unless they can agree regional or global measures that reassert their power, are hugely exposed.

In his letter of February 23rd, 2012, to the Taoiseach, Miles D White, chairman and chief executive of Abbott Laboratories in Illinois, directly linked inward investment and the price his company gets paid by the State for the drugs it supplies.

“In common with other pharmaceutical multinational organisations, we find it difficult to reconcile a policy of pursuing inward manufacturing investment with an attempt to drive medicine prices to among the lowest in the European Union,” he wrote.

The price paid by a government for pharmaceuticals is referenced according to the prices paid by other governments, with the system being organised into “baskets” of countries whose prices are linked.

White’s concern was not so much with his company’s profits from sales here as with the effect any drop in Irish prices would have in other, larger markets.

“International price-referencing results in pricing in Ireland having a knock-on effect on the pricing of medicines in 11 other European countries and up to an additional 37 countries worldwide,” he wrote.

“Driving down the price of medicines across such a large number of export markets for the Irish-based pharmaceutical industry could directly jeopardise jobs in Ireland as it will create substantial pressure to cut manufacturing jobs.”

The Irish pharmaceutical sector employs up to 25,000 people directly, and the same number indirectly, and is a major contributor to Irish exports. The pharmaceutical firms that wrote to Enda Kenny warned that Government decisions aimed at reducing its drugs bill could have “unintended consequences”.

It is a strange thing to have a sector lobbying the Taoiseach to help it combat reductions in the price of its products, not just in this country but in 11 others in Europe, and up to 37 worldwide, and while doing so to suggest that a failure to deliver might affect inward investment into Ireland.

Price paid

Ireland’s drug prices are among the highest in the world, with a recent survey finding that costs here are up to 45 per cent higher than they are in Sweden.

As this newspaper’s health correspondent, Paul Cullen, has observed, it is hard to avoid the conclusion that the high cost of drugs in Ireland is part of the price we pay for having a large pharmaceutical sector.

In fact, given the basket arrangement, citizens in 11 other European countries, and 37 worldwide, may be paying the price. It is important to remember that what is at issue is the price paid by governments for pharmaceutical products.