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Drug pricing: Is it necessary for life saving drugs to be so expensive?

Diabetes, cancer, these are just the most common diseases where drug pricing is affecting the livelihood of people suffering from them.

How many people that you know have ever needed a lifesaving drug? Diabetes, cancer, these are just the most common diseases where drug pricing is affecting the livelihood of people suffering from them.

The business world has one main goal, to sell a product to satisfy demand. The company’s objective is to maximize profit, without breaking the law. This profit motive is generally accepted as a characteristic of the free market and rarely raises ethical questions. However, there are industries where social good may take precedence over profit. The pharmaceutical industry presents one instance but how does pharma difference itself from other industries? Their products save lives, they are not commodities, such as television, basic food items etc.


But how does pharma adhere to any of these dilemmas that have gone to shape our society?

Pharma industry raises itself at a higher standard and faces ethical issues distinct from other industries. There are a few powerful players controlling the supply of arguably the most critical products in an economy. Their products save the public good and save lives, keep people alive see- insulin so do they have the right to put a price tag on someone’s life?

One instance where the population of an entire country, a government considered that, as The Guardian related in on of their articles from 2013, India decided to sue Novartis for their cancer drug Glivec after the company slightly altered the formulation in order to obtain a patent and keep their price increase for the general public, decreasing the number of people able to afford the drug. India won the case and brought the price down. This landmark case has been widely criticized by the industry, but we are going to see why later.

According to IBM Watson Health data, Sanofi’s prominent insulin brand Lantus was $35 a vial when it was presented in 2001; it’s currently $270. Novo Nordisk’s Novolog was estimated at $40 in 2001, and starting at July 2018, it’s $289.


Standing on the other side is the industry… Yes, prices keep raising but would there be new, better, more efficient drugs to come to the market without the constant investment in R&D?

There are many sources that confirm that the pharmaceutical industry is in decline because it cannot keep the costs low enough in order to make profit with the internal rate of return for the industry’s R&D declining from almost 30% in 1990 to about 5% in 2015 and being predicted it will reach 0% by 2020. How are the companies supposed to research potentially lifesaving drugs without going bankrupt?

To put things into perspective, a research made by Matthew Herper of Forbes together with Innothink consultancy decided to look at the top 10 companies that only released one cancer drug between 2006 and 2015 and their average cost was approximately $ 650 million. Upscaling this model they discovered that the median R&D expenditures for the same time period for the companies that developed 6 or more drugs was $5.8 billion.

Given that 9 in 10 drugs fail during clinical trials, it is safe to say that maybe not everything is black and white and maybe companies have their reason for the pricing of their drugs.


So, what is the answer, where is the balance?

In 2017, Dr. Roy Vagelos, Chairman of the Board at Regeneron and former Chairman of the Board and CEO of Merck&Co. even acknowledged the issue stating that: “The industry has a lousy image and it should, until it reforms itself”

The objective of lower medication costs has risen as shared conviction in a profoundly isolated Congress, yet policymakers as well as companies still can’t seem to build up a long-haul exhaustive arrangement.

There are continuous talks with regards to ways to approach the best solutions for patients, governments and companies, so far, the proposals being: deny producers from offering limits or refunds to “drug store advantage directors” that control medication plans. Rather, the companies would be urged to give refunds straightforwardly to buyers. Officials have said they are doubtful regarding whether it would drive down expenses and communicated concerns it could end up raising costs, with another, declaring that a solution is to restrict prices for specific medications for Medicare beneficiaries by tying the cost at certain medications to costs paid abroad. The measure would just apply to particular kinds of medications by means of Medicare that are regulated by a doctor, but that was rebutted by the industry stating that this would put a damper on innovation.


In the end, the debate is not to assign blame but to ask what should be done?


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