Skip to main content

Price War in the US and EU

From the series Industry and pharmaceuticals

The contention in the biopharmaceutical field between the two sides of the Atlantic addresses the issue of costs, in two different ways. In a letter to the Financial Times published on April 23rd, Vas Narasimhan and Paul Hudson, the CEOs of Swiss company Novartis and French company Sanofi respectively, presented a harsh diagnosis of the state of European biopharmaceuticals compared to their major competitors, the United States and China. Narasimhan, an American son of immigrants from Tamil Nadu, and Hudson, a Briton, head two of the world's ten largest pharmaceutical multinationals. The two executives see "a strong outlook for the US – thanks to policies and regulations conducive to fast and broad patient access to innovative medicines". In contrast, Europe, "while home to some of the most important biopharma companies in the world", risks decline. "Against a backdrop of waning European biopharma competitiveness, the uncertainty of tariffs is further reducing incentives to invest in the EU". Furthermore, "in the new world context, Europe's pharmaceutical model of producing in Europe and exporting to the US cannot continue. It needs to strengthen its domestic market". They note that in recent weeks biopharmaceutical companies have announced investments in the US of over $150 billion, while there have been no such plans in Europe.

The view from Europe

"Europe's largest issue is failing to properly value innovation", according to Narasimhan and Hudson. "European price controls and austerity measures reduce the attractiveness of its markets. Launch prices are suppressed, patented medicines' growth capped, and prices reduced when new applications are found". As a result, more than 30% of medicines authorised in the United States were still not available in the European Union after two years. The US and China encourage innovation, while Europe penalises it: "Over time it is inevitable that clinical trials and R&D will further shift to the US and China". The CEOs of more than 30 pharmaceutical companies (including US companies) operating in Europe have urged European Commission President Ursula von der Leyen to introduce measures to compensate for the costs of innovation and deliver "radical policy change" in pharmaceuticals [Reuters, April 15th]. The "major European pharmaceutical reform" currently being finalised by the Commission has also attracted criticism, particularly the planned changes to intellectual property protections. For the EFPIA (European Federation of Pharmaceutical Industries and Associations), it is "a missed opportunity to position Europe's life-sciences sector at the forefront of global competition" [If Sale 24 Orc, June 10th]. Novartis and Sanofi are calling on the European Commission and European States for greater price liberalisation and incentives for investment in innovation to make their markets more attractive. Without deregulation, they write, European decline is inevitable.

According to research by the non-profit organisation RAND, based on 2022 data, the gross prices of prescription drugs (or "ethical" drugs) in the United States are on average almost three times higher than those in other OECD countries. RAND considers gross manufacturer prices because the final cost, after various discounts applied by companies along the distribution chain to wholesalers, pharmaceutical managers, health insurers, hospitals, and pharmacies, is not always known. Even taking into account estimated discounts, however, average prices remain three times higher than the OECD average [RAND, International Prescription Drug Price Comparison, 2024].

The view from America

The Trump administration brandished this figure in its May 12th executive order, which announced an "aggressive" plan "to bring prices for American patients and taxpayers in line with comparably developed nations". In reality, not all prescription drugs cost more in the United States. According to RAND, the average price of brand-name drugs is more than four times higher than in OECD countries, but generic products, where competition is fiercer, cost a third less (67%). Generic drugs account for 90% of prescriptions in the US, compared to an average of 41% in the other OECD countries considered.

In the executive order, the White House accuses manufacturers of offering discounted prices "to access foreign markets and [subsidising] that decrease through enormously high prices in the United States". The United States is "subsidising drug-manufacturer profits and foreign health systems". The world benefits from American research supported by "generous subsidies".

Under the order, the Department of Health is tasked with setting "price targets" to be negotiated with companies, based on prices in other countries, according to the "most favoured nation" principle. In the event of non-compliance, the order threatens rules imposing reductions and other "aggressive action" such as importing from countries with better prices.

The issue of drug prices is a long-standing one in the US. In Europe, where single-payer healthcare systems prevail, prices are negotiated by government agencies, which have strong bargaining power with regards to companies. In the US, manufacturers set list prices and then negotiate discounts with insurance companies, hospitals, and intermediaries such as Pharmacy Benefit Managers (PBMs).

Towards the end of his first term, Donald Trump had already tried unsuccessfully to impose a price cut on 50 drugs. In 2022, with the Inflation Reduction Act (IRA), then-President Joe Biden shook up the pharmaceutical market by allowing Medicare, the federal healthcare programme for the elderly, to negotiate prices directly with pharmaceutical companies, which had previously been explicitly prohibited. The following year, the Biden administration released a list of the first ten drugs targeted by the new policy, and in 2024, amidst a presidential election campaign that included healthcare spending as one of its main issues, Biden and candidate Kamala Harris announced a "historic" agreement with drug companies that will take effect in 2026 unless cancelled. The cut will average 25%, and the Congressional Budget Office has estimated that Medicare will save $100 billion over a decade [Financial Times, March 20th, 2023].

Regulation or market

The reforms contained in the IRA had to overcome fierce opposition from multinational pharmaceutical companies, which argued that a price cap would discourage investment in the research and development of new medicines. Six Big Pharma companies from three continents sued the Biden administration on several grounds, including violation of the First Amendment for "the taking of private property for public use without just compensation" [The New York Times, August 29th, 2023]. The US companies Merck, Bristol-Myers Squibb and Johnson & Johnson, Japan's Astellas Pharma, Britain's AstraZeneca and Germany's Boehringer Ingelheim were also supported by the Chamber of Commerce and the PhRMA (Pharmaceutical Research and Manufacturers of America) lobby.

President Trump's current executive order, on the other hand, has so far elicited a "lukewarm" response from companies, which are sceptical about its practical implementation. According to legal and health policy experts quoted by the British Medical Journal, "the executive order reads more like an aspirational statement than a serious attempt to initiate a policy change". The "legal powers" to impose a price-control mechanism not provided for by Congress (traditionally resistant to regulatory interference, especially on the Republican side) are being questioned. Legal disputes are on the horizon. A more likely scenario is "isolated price reductions" through voluntary negotiations [BMI, "Can Trump Really Lower US Drug Prices and Raise Them in Other Countries? Probably Not", June 6th, 2025].

The order seems to be more aimed at intermediaries such as PBMs, big groups that negotiate with companies on behalf of insurers and hospitals. This criticism is shared by the drug companies, which add a dose of protectionism. In a May 12th statement on the order, PhRMA President Stephen J. Ubl said that the "real reasons" prices in the US are higher are "foreign countries not paying their fair share and middlemen driving up prices for US patients. The administration is right to use trade negotiations to force foreign governments to pay their fair share for drugs. US patients should not foot the bill for global innovation".

Between competition and opportunity

For any State, it is a question of public spending, which weighs heavily in the confrontation between powers. Imperialist metropolises are struggling to bear the costs of healthcare. New equipment and increasingly promising – but also more expensive – diagnostic and therapeutic methods are challenging the sustainability of national budgets. Life-sciences companies, on the other hand, are engaged in international competition based on their capacity for innovation.

The rise of China looms over the United States and Europe. According to Narasimhan and Hudson, "China, now the second largest biopharma market, has expanded its position by attracting multinationals and creating a vibrant biotechnology environment". A 2023 European Commission analysis of the 2,500 companies worldwide with the highest R&D expenditure found that 12% of the companies investing the most in health research are based in Europe, compared with 55% in the US and 17% in China [Financial Times, April 26th, 2024].

In medical biotechnology, Chinese companies have produced many promising new molecules, but these require further development to an advanced stage and investment that Chinese companies lack. Western groups, primarily European ones, offer the necessary capital and guarantee marketing licences outside China. Chinese biotech companies have signed 98 cross-border licensing agreements worth around $60 billion. In the first quarter of this year, there were 33 agreements worth $36.2 billion. The "new frontier" of Chinese biotechnology is a challenge for Western groups, but is also an opportunity.

Lotta Commisita, July-August 2025

Labels:

Popular posts from this blog

Uneven Development, Job Cuts, and the Crisis of Labour Under Global Capitalism

Internationalism No. 73, March 2025 Page 16 Uneven development is a fundamental law of capitalism. We have a macroscopic expression of this in the changing balance of power between States: Atlantic decline and Asian rise are the key dynamics behind the political processes of this era, including wars caused by the crisis in the world order. But behind all this there is a differentiated economic trend, starting from companies and sectors: hence the differentiated conditions for wage earners. And this is the element to keep in mind for an effective defensive struggle. It’s only the beginning The electrical and digital restructuring imposed by global market competition affects various production sectors. The car industry is the most obvious, due to the familiarity of the companies and brands involved. We have already reported on the agreement reached before Christmas at Volkswagen, which can be summarised as a reduction of 35,000 employees by 2030. Die Zeit [De...
Read more

In the Depth of Our Class

The pandemic of the century is a storm that does not subside; it returns to its rampage after 40 million infections and more than a million official victims, perhaps two million according to estimates on the excess deaths. In the contention between powers, China stands as the winner: it seems to have tamed the virus, and industry and services are up and running; the USA and Europe, on the other hand, are moving towards a new wave of infections that casts yet more shadows on the economic cycle. Political structures and health systems are at the height of tension. In America, the elections have judged Donald Trump’s rash demagogy on the basis of the opposite reasons for containing the pandemic and the intolerance of small and large producers; in Europe the executives are attempting to steer between the surge in infections, increasingly stringent confinement measures and the threats of fiscal jacquerie in the tourism and catering sectors. Almost everywhere, in the Old Continent, governm...
Read more

Bolsonaro Squeezed between Pandemic, Lula Card and Armed Forces

This article is taken from Intervenção Comunista — the journal of our Brazilian comrades We wrote in May last year that the ‘tropical Trump’ causes a perfect storm . This first quarter of the year seems to demonstrate this clearly: GDP decline (-4.1%) and increased unemployment (14.2%); an end to emergency aid and a delay in the resumption of a new, much leaner aid plan; a record number of deaths and Covid infections. With 2.7% of the world’s population, the country accounts for about 12% of Covid-19 deaths. In March alone, Brazil recorded an increase of about 33% in its daily deaths. The pandemic crisis, coupled with historical imbalances, is shaking up the dysfunctional government of Jair Bolsonaro, who has just appointed his fourth health minister in a year. Increased dependence on the Centrão The second half of Bolsonaro’s term began — for their politics — with the election of Arthur Lira (Progressive Party-Alagoas) as president of the Chamber of Deputies, and Rodrigo Pac...
Read more

Forces and Consequences of the New Strategic Phase

The new strategic phase in the world balance, with its new corresponding political cycles within powers, requires attention to the materialistic, historical and dialectical method of political analysis itself. The changing forces and basic trends need to be identified; we can make conjectures about the developments in single political battles, but the outcome of these battles will always require us to contemplate a plurality of solutions: some more probable. others less. but never Just a mechanical consequence of long-term economic movements. Many fixed points of the method of political analysis are usual tools in our Marxist elaboration, but this does not mean they must be taken for granted: it is of use to recall them, in relation to the new unknowns of the political battle. Men make their own history, but they do not make it just as they please; they do not make it under circumstances chosen by themselves, but under circumstances directly encountered, given and transmitted from t...
Read more

The New Energy Shock

Internationalism No. 33, November 2021 Page 6 Can a good recovery do damage? The answer is: yes, sometimes it can, if it triggers major imbalances. The capitalist mode of production is a source of imbalances, inequalities and asymmetries. This time, the imbalance is largely due to the states which have concocted an unexpectedly strong recovery, pulled along by private consumption, with their stimuli, subsidies, relief, tax cuts and zero-rate credits. According to The Economist , the stimuli handed out by governments during the pandemic amounted to about $10,400 billion in the world, equal to one eighth of the 2020 gross world product in current dollars. According to the April IMF Fiscal Monitor , governments, additional expenditure and lost revenue in the advanced economies were equal to 16% of the sum of their GDPs, in the face of losses which, in the final balance sheets, amounted to 4.5% of it. A good part of this went on governmen...
Read more

Another Kind of Politics

Donald Trump has said goodbye as befits his fame, with a tragic riotous revelry. A crowd with improbable disguises took its cue from the fake news on the Internet fomented by the presidency, assaulted the Capitol and wandered around its rooms and corridors with the aim of intimidating representatives and senators. All of this, however, taking selfies: a moment of fame on Facebook or YouTube and a trophy to show off back home in deepest America, while carousing in the local pub. His successor Joe Biden will seek a rebalance in a bipartisan collaboration, but he cannot escape from the dominant trait now characterising the political show . The swearing-in ceremony was the enthronement of a republican king, according to the rites of Hollywoodian show business: pop singers, actors, directors, and rock stars, and the new reigning couple hand in hand as they admired the fireworks in the night. Meanwhile, on the other shore of the Atlantic, a similar depressing show is going on the air with ...
Read more

The future of work in Europe

Every moment of transition presents its own complexities: for our class this means that further divisions are sown within it. Such is the present moment — one when different dynamics stack up and intertwine. Past, present and future On the one hand, there is the troubled exit from the pandemic crisis, still under the threat posed by the emergence of new Covid-19 variants. The pause on redundancies has come to an end in Italy. This, albeit partially, would have spared about 520,000 jobs in Italy up until now, according to Centro Einaudi’s estimates [ 25 th Annual Report on Global Economy and Italy , June 2021]. Company closures and staff reductions (in a mixture of arrogance and callousness) have marked the summer months, only to announce a difficult autumn, when the redundancy ban will be lifted also for small businesses and services. However, it is clear how uncertain the workers’ condition remains, regardless of any collective agreement signed, and how necessary it is always to ...
Read more

The Syrian Crisis Reveals the Limits of the Russian Power

Internationalism No. 73, March 2025 Page 5 When, in 2015, Moscow initiated direct military intervention in Syria against ISIS bases and in support of Bashar al-As-sad's regime, this was seen as a signal of Russia’s resurgence as a great power: it was its first deployment in a war zone outside the territory of the former USSR since its withdrawal from Afghanistan in 1989. Singers of the resurrection Sergey Karaganov, honorary chairman of the Council on Foreign and Defence Policy, and currently one of the most fervent supporters of the war in Ukraine, wrote that this action “has strengthened Russia’s international position”, to the point of making 2015 “one of the most successful years in the history of Russian foreign policy” [Russia in Global Affairs, February 23, 2016). Dmitri Trenin, then head of the Carnegie Center in Moscow, which was later closed by the authorities in 2022, revisited this in his 2018 book What is Russia up to in the Middle East?, ...
Read more

Crisis in Europe’s Auto Industry: Labour Struggles, Class Conflict, and the End of Social Partnership

Internationalism No. 71, January 2025 Page 16 We have on several occasions pointed to the automobile manufacturing sector as an indicator of the shifting economic and, consequently, political balance of power between States. It is inevitable that this also applies to the dynamics of the labour market and therefore to the balance of power between classes. A new social cycle The emergence of the Chinese imperialist giant is also shaking up social relations in the old metropolises. We have defined this moment as the descending phase of social-democratisation , the era in which the “conquests” of the previous ascending cycle are called into question. It is the phase in which what was believed to be guaranteed, including in terms of employment relationships, is in danger of being lost. What appears at first glance as merely an effect of technology (in this sector, specifically the development of the electric car) in fact reflects a more general shift in influenc...
Read more

The Chinese Dragon Does Not Wait for American Rearmament

From the series News from the Silk Road According to The Washington Post , through the federal budget the White House has opened negotiations with the Senate that include long-term competition with China. The figures — $6 trillion, including infrastructure and family welfare plans — will vary in the negotiations, and will be centred on three directives. One demand is common to various proposals of expenditure: they must have a positive impact on the American productivity vis-à-vis China on the open fronts of industrial, energy and technological restructuring, or on the efficiency of welfare systems. In the case of welfare, the competition is also vis-à-vis Europe. Another calculation, attributed to Biden’s administration and the Democrats, is the enlargement of the electoral coalition in view of the next mid-term elections. Finally, there is a need to direct military expenditure, within the framework of a greater increase in the other items of discretionary expenditure, not absorb...
Read more