The Pharmaceutical Industry and Health Reform: Lessons From Europe

Prologue: In the late 1980s many European nations launched reforms in their health care systems, with cost control a key motivation. Some European countries have begun to see growth rates in health spending that equal or surpass that of the United States. The United Kingdom, for example, had a 1991-1992 growth rate of 11.4 percent for per capita health spending, compared with an 8.5 percent U.S. growth rate. As European nations strive to control costs, the effects of their new reforms on innovation offer lessons for the United States as it struggles to reform its own health system. A key point for Americans to remember, says author John Hutton, is that “while everybody's interested in cost containment in Europe, they're going about it in different ways, and they all started from very different systems.” Hutton is director of the Battelle Medical Technology Assessment and Policy Program (MEDTAP) European Office in London. He is a public-sector and industrial economics specialist with a bachelor of science degree in economics from the London School of Economics. He is also founding coeditor of the journal Health Economics, Michael Borowitz, research scientist with Battelle s Center for Public Health Research and Evaluation (CPHRE) in London, received medical and master of public health degrees from Tulane University and a doctorate in public policy from the University of Chicago. Inga Oleksy was a research associate at Battelle at the time this paper was written. Bryan Luce is director of MEDTAP and heads Battelle s CPHRE office in Arlington, Virginia. Previously he was director of the Health Care Financing Administration Office of Research and Demonstrations and senior analyst at the congressional Office of Technology Assessment. He received a doctorate from the University of California, Los Angeles, and a master of business administration degree from the University of Massachusetts. Abstract: Many countries in Europe, which have significant pharmaceutical industries, recently have embarked on reforms in the organization of their health care systems and methods of regulating the pharmaceutical market. This paper describes the different systems in major European countries and the changes taking place. Although it is too early to make final judgment on the impact of these changes, it is possible to predict some of the more likely outcomes. The organizational models and regulatory approaches in Europe offer a useful store of experience for those assessing the potential impact of reform proposals in the United States.