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Study weakens Lilly's fight against price controls

September 12, 2009

Eli Lilly and Co. and its peers might be back in Congress’ sights as lawmakers hunt for more ways to cut health care costs.

A new study in the influential Health Affairs journal concludes that European drugmakers operating in markets with pharmaceutical price controls have produced proportionally more innovations than their U.S. counterparts.

The study undercuts an argument made over and over again by Lilly execs: that health reform must preserve profit potential for pharmaceuticals so companies can afford to keep pumping out innovative new drugs.

“One policy ‘truth’ in pharmaceuticals is that price controls hurt innovation. If price controls don’t in fact diminish innovation as the recent study implies (contradicting previous work), then regulators in the U.S. can pressure prices,” health care stock analyst Les Funtleyder, of Miller Tabak & Co., wrote in a note to investors. That could hurt drugmakers’ stock prices and diminish their pipelines of new drugs, he added.

A health reform bill in Congress would allow the federal Medicare program to negotiate discounts with drugmakers, something Lilly and its peers have opposed as akin to price controls. Also, President Obama has supported the reimportation of drugs to the United States from countries where they are sold at controlled prices.

The Pharmaceutical Researchers and Manufacturers Association issued a two-page statement rebutting the study’s conclusion.

“Unfortunately, the paper paints a distorted picture that gives short shrift to the medical advances made possible by America’s pharmaceutical research and biotechnology companies and ignores the chilling effect of government price controls on such innovation,” the association’s statement read.

In response to questions, a Lilly spokesman reissued the association’s statement.

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