Most ‘medicines are too damn expensive. And a key part of the problem is the lack of consistent information about drug pricing. It’s not often that the Trump administration and the anti-poverty NGO Oxfam find themselves singing from the same hymn sheet.’ This was articulated in the article carrying a headline, ‘No One Knows The True Cost Of Medicines, And Blaming Other Countries Won’t Help,’ published by Forbes on March 03, 2019.
In the oldest democracy of the world, on the eve of the last Presidential election, Kaiser Health Tracking Poll, September 2016 captured the public anger on skyrocketing cost of prescription drugs, which they ranked near the top of consumers’ health care concerns. Accordingly, politicians in both parties, including the Presidential candidates, vowed to do something about it.
Ironically, even so close to General Election in the largest democracy of the world, no such data is available, nor it is one of the top priority election issues. Nevertheless, the discontentment of the general public in this area is palpable. The final push of election propaganda of any political party is now unlikely to include health care as one of the key focus areas for them. This is because, many seemingly trivial ones are expected to fetch more votes, as many believe.
In this area, I shall dwell on the ‘mystic’ area of jaw dropping, arbitrary drug pricing, especially for innovative lifesaving drugs – drawing examples from some recent research studies in this area.
High drug prices and associated health risks for billions of people:
New Oxfam research paper, titled: ‘Harmful Side Effects: How drug companies undermine global health,’ published on September 18, 2018, ferreted out some facts, which, in general terms, aren’t a big surprise for many. It highlighted the following:
- Abbott, Johnson & Johnson, Merck and Pfizer – systematically hide their profits in overseas tax havens.
- By charging very high prices for their products, they appear to deprive developing countries more than USD 100 million every year – money that is urgently needed to meet health needs of people in these countries.
- In the UK, these four companies may be underpaying around £125m of tax each year.
- These corporations also deploy massive lobbying operations to influence trade, tax and health policies in their favor and give their damaging behavior greater apparent legitimacy.
- Tax dodging, high prices and political influencing by pharmaceutical companies exacerbate the yawning gap between rich and poor, between men and women, and between advanced economies and developing ones.
The impact of this situation is profound and is likely to further escalate, if left unchecked, the reason being self-regulation of pharma industry is far from desirable in this area.
As discussed in the article, titled ‘Why Rising Drug Prices May Be the Biggest Risk to Your Health,’ published in Healthline on July 18, 2018, left unchecked, the rising cost of prescription drugs could cripple healthcare, as well as raise health risks for millions of people. Although this specific article was penned in the American context, it is also relevant in India, especially for lifesaving patented drugs, for treating many serious ailments, such as cancer.
Is pharma pricing arbitrary?
The answer to this question seems to be no less than an emphatic ‘yes’. Vindicating this point, the above Forbes article says: ‘It’s a myth that the costs of medicines need to be high, to cover the research & development costs of pharmaceutical companies.’
Explaining it further, the paper underscored, ‘Prices in the pharma industry aren’t set based on a particular acceptable level of profit, or in relation to the cost of production. They’re established based on a calculation of the absolute maximum that enough people are willing to pay.’
The myth: ‘High R&D cost is the reason for high drug price’:
Curiously, ample evidences indicate that this often-repeated argument of the drug companies’, is indeed a myth. To illustrate the point, I am quoting below just a few examples, as available from both independent and also the industry sources that would bust this myth:
- My article, titled “Patented Drug Pricing: Relevance To R&D Investments,” published in this blog on August 18, 2014, explains how, irrespective of R&D costs, the companies stretch new drug pricing to the farthest edge for profit maximization.
- Several research studies show that actual R&D cost to discover and develop a New Molecular Entity (NME) is much less than what the pharma and biotech industry claims. Again, in another article, titled ‘The R&D Factor: One of the Greatest Myths of the Industry,” published in this blog on March 25, 2013, I also quoted the erstwhile CEO of GlaxoSmithKline (GSK) on this subject. He clearly enunciated in an interview with Reuters that: “US $1 billion price tag for R&D was an average figure that includes money spent on drugs that ultimately fail… If you stop failing so often, you massively reduce the cost of drug development… It’s entirely achievable.”
- In addition, according to the BMJ report: ‘More than four fifths of all funds for basic research to discover new drugs and vaccines come from public sources,’ and not incurred by respective drug companies.
- Interestingly, other research data reveals that ‘drug companies spend far more on marketing drugs – in some cases twice as much – than on developing them.’ This was published by the BBC New with details, in an article, titled ‘Pharmaceutical industry gets high on fat profits.’
World Health Organization (WHO) recommends transparency in drug pricing:
The report of the United Nations Secretary-General’s High-Level Panel on ‘Access to Medicines’ released on September 14, 2016 emphasized the need of transparency in this area of the pharma sector. It recommended, governments should require manufacturers and distributors to disclose to drug regulatory and procurement authorities information pertaining to:
- The costs of R&D, production, marketing and distribution of health technology being procured or given marketing approval to each expense category separated; and
- Any public funding received in the development of any health technology, including tax credits, subsidies and grants.
But the bottom-line is, not much, if any, progress has been made by any UN member countries participating in this study. The overall situation today still remains as it has always been.
The Oxfam report, as mentioned above, captures how arbitrarily fixed exorbitant drug pricing, creates a profound adverse impact on the lives of billions of people in developing and underdeveloped countries. Let me quote here only one such example from this report corroborating this point. It underlined that the breast cancer drug trastuzumab, costing around USD 38,000 for a 12-month course, is almost five times the average income for a South African household. The situation in India for such drugs, I reckon, is no quite different.
To make drug pricing transparent for all, the paper recommends, “attacking that system of secrecy around R&D costs is key.” Pharma players have erected a wall around them, as it were, by giving reasons, such as, ‘commercial secret, commercial information, no we can’t find out about this’…if you question intellectual property, it’s like you’re questioning God.” The report adds.
In India, the near-term solution for greater access to new and innovative lifesaving drugs to patients, is to implement a transparent patented drug pricing policy mechanism in the country. This is clearly enshrined in the current national pharma policy document, but has not seen the light of the day, just yet.
In the battle against disease, life-threatening ailments are getting increasingly more complex to treat, warranting newer and innovative medicines. But these ‘drugs are too damn expensive’.
In the midst of this complicated scenario, billions of people across the world are getting a sense of being trapped between ‘the devil and the deep blue sea.’Occasional price tweaking of such drugs by the regulator are no more than ‘palliative’ measures. Whereas, a long-term solution to this important issue by the policy makers are now absolutely necessary for public health interest, especially in a country like India.
By: Tapan J. Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.