« Snapshot of RFID from Walmart suppliers’ perspective   |   Main   |   European smartphone & handheld trends »

Bain & Co. presentation at Davos WEF Conference

This past week, leaders gathered in Davos, Switzerland, to discuss key economic and policy issues. Bain & Co., a consulting firm, presented a paper reviewing the economic costs of the inequitable split between the US and the EU in terms to pharma development.
Pharma is not generally within my core focus, however, this piece gives an excellent analysis of the unintended consequences and second-level effects that arise from execution of a flawed strategy.

In the paper, Jim Gilbert & Paul Rosenberg explore the consequences arising from the different policies of the US and the EU towards pharma. It’s well known that US consumers bear a disproportionate share of the cost of drug discovery in the form of higher drug costs, while consumers in other countries benefit from the bargaining power of their national healthcare systems, which often gain huge price concessions. Over the last decade, pharmas have made these concessions, planning to recoup their R&D investment from their unregulated prices in the US. This is a hot political issue now in the US, with medical costs rising.

The analysts at Bain take this issue a step further, shifting the focus not on the impact on consumers, but the impact on the larger economies. Their work draws attention to the second-level impact on EU countries of their ostensible ‘win’ for consumers, painting a picture of longer waits for new medicines, limited availability of both new medicines and local trials of new formulations, and a shift of pharma research to the US.

This is an instance where the strategy employed by EU nations to secure the lowest price for pharmaceuticals resulted in a higher-than-anticipated cost. A parallel, yet-unreasearched situation is that of Walmart - where their obsessive pursuit of the lowest price is wreaking havoc both in their home markets, as US factories and competitors cannot match their prices, and abroad, where the constant drive for lower costs is cutting even Chinese labor markets to the bone. A focus on the simple price of any good is simplistic at best and highly destructive of economic value at worst.

Source:
Addressing the Innovation Divide: Imbalanced innovation