International price comparisons for novel and follow-on drugs.

Countries that represent a small portion of overall drug spending have an incentive to pay low prices for a given drug, knowing that their share of drug spending is small enough not to adversely affect incentives for research and development. If, however, many countries use price controls, the aggregate harm for research incentives could be substantial. The US which accounts for 48% of global pharmaceutical sales [1], would probably harm research incentives if it used price controls, so the US might want to pressure other countries to pay more. Olson and Zeckhauser described the exploitation of the great by the small (referring to government military alliances) [2]. In 2003, FDA Commissioner Mark McClellan scolded other countries for using drug price controls to avoid paying their “fair share” and “slowing the process of drug development worldwide” [3].