Why are drugs so expensive?

How do developing countries gain access to treatments? And why do drugs cost so much in the first place?
27 May 2014

Interview with 

Jennifer Cohn, Medicine Sans Frontiers, Joshua Cohen, Tufts University


Burning questionsHow do developing countries gain access to treatments? And why do drugs cost so much in the first place?

Ginny - We use NICE to help us decide which drugs we should have access to, but what do other countries do, and how do we make sure that low and middle income countries still have access to live saving medicines?

Jennifer Cohn is from Medicine Sans Frontiers and Joshua Cohen is from Tufts University in the US.

Joshua - I think it depends very much on the political lens through which Americans may look at something like the National Institute for Clinical Excellence. Those in the US opposed to government regulations and rationing would think of NICE as a death panel of sorts and those who are in favour of some degree of regulations by government would view NICE as a useful framework. However, it's not directly translatable to the US healthcare system. The system we have in the United States is decentralised to a degree that certainly, the UK is not. With literally hundreds of payers and 50 states and federal state division of labour with respect to government, you're not going to see a NICE-like body being instituted. That being said, Obama Care in some ways does use NICE-like mechanisms such as spending lots of money on comparative effectiveness research.

Ginny - So, that's a good point. In America or in the UK, we do actually have a reasonable amount of money to spend. So, when we're looking at how expensive drugs are, we have a very different framework from say, low and middle income countries. Jennifer, I know you work with those sort of countries. Do they pay the same sort of amount as us to drugs?

Jennifer - It really depends. So, many low income countries can have access to generic medicines and some cases, before countries like the US or UK can. And that's because of laws that recognise that public health needs may come before patent and profits. Now, that's not to say necessarily that these drugs are always affordable. However, let's take the example of HIV. In 1999, the cost of a brand name first line anti-retroviral regimen to treat HIV in low and middle income countries was about $10,000 per patient per year. Now, that's far, far above what most countries could afford and this again is at a time when countries in Southern Africa such as Swaziland and even Botswana were looking at HIV infection rates of about 40% or nearly 1 in 2 people. Now, within about a year, prices came down dramatically from $10,000 per patient per year to about $350 per patient per year. And why it was that? that was almost exclusively because of the entry of generic manufacturers that produced quality versions of these exact same medicines for patients. And the effects of competition can rapidly bring down prices and thus increased access to patients who desperately need these drugs.

Ginny - Jennifer, when we're talking about low and middle income countries, is it just places like Africa or are there other places in EU that are paying less than us for drugs?

Jennifer - Absolutely. So, in many cases, the drugs that are available generically may not just be available in Africa. So again, for instance, countries like Thailand may have access to generics as well. Countries in the EU generally follow the same patent laws. In fact, the EU does have an agreement that lowest cost medicine in one country in the EU can actually be imported to other countries in the European Union. But that's just an agreement within the European Union.

Ginny - Now, I've had a question in from Facebook. Richard Lyle says, "What can be done to reduce the cost of bringing a new drug to market without putting patients' safety at risk?" So drug companies tell us that they have to charge these high prices because of all the development cost and we actually asked several drug companies to come along and talk to us tonight. Unfortunately, none of them were available, but Joshua, what do you think? Could we bring the prices down?

Joshua - Yes, but let me first start out by saying, the high cost of drug development is not and should not be a justification per sey of high prices. Markets may justify high prices if the drug is highly valued by patients and doctors. Especially if we're talking about brand name drugs - drugs for which they are limited or no treatment alternatives. In a competitive market, price should be a reflection of supply and demand. And in particular, an informed consumer's willingness to pay for a drug. But the problem is, healthcare markets are notoriously characterised by some degree of market failure. And the most distinctive feature of this market failure is the fact that consumers are generally not well informed about a drug's value or its cost. This is really where NICE and other health technology assessment organisations also in the US would come in and make some kind of value assessment of the drugs that are in the market. Now, we should distinguish between the brand name drugs, new drugs, and the particular drugs that create a unique therapeutic class from generic drugs. In the United States, about 85% of prescriptions are now generic. The pricing debate certainly does not affect generics. It's not about generics. It's about those brand name drugs targeting populations, often orphan populations. The drugs are quite expensive and that's really what the pricing debate is looking at.

Ginny - We'll have to leave it there I'm afraid, but thank you so much to Jennifer Cone and Joshua Cohen for joining me.


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