[Ip-health] The Economist: The global battle over high drug prices - Western countries, as well as poor ones, are demanding transparency in the cost of drugs

Thiru Balasubramaniam thiru at keionline.org
Tue May 21 17:31:17 PDT 2019


Costly medicinesThe global battle over high drug prices

Western countries, as well as poor ones, are demanding transparency in the
cost of drugs
Business and financeMay 21st 2019

THESE DAYS it is hard to find a government that is not struggling with the
high price of medicines. In England, the government is fighting Vertex, a
drug company, over the cost of a drug for cystic fibrosis, Orkambi. In
America, diabetics have died because of the high cost of insulin. In the
Netherlands, the government for a time stopped buying the immuno-oncology
drug, Keytruda, because it was too expensive—even though it had helped to
develop it. The list price of Orkambi is about $23,000 a month in America,
and Keytruda is about $13,600 month (for as long as treatment continues).
It has taken such rich-world dramas to force the unaffordability of
medicines to the top of the global health agenda, even though poorer
countries have complained about it for decades.

On May 20th governments started tackling the issue at the World Health
Assembly (WHA), an eight-day policy forum where health ministers define the
goals for the World Health Organisation for the coming year. There is a lot
for them to discuss, including the expansion of universal health care,
antimicrobial resistance, the impact of climate change on health and the
deepening crisis of Ebola in the Democratic Republic of Congo. Yet the
hottest topic is the high price of new medicines, particularly cancer drugs.

In February the Italian health minister, Giulia Grillo, published a draft
resolution on drug pricing. It calls for international action to improve
the transparency of prices and R&D costs, as well as the costs of
production of medicines. Firms will also be asked to divulge all the
different forms of government support they receive. These may range from
venture-capital funds and start-up financing to tax incentives and even
research conducted by academics. The hope is that greater clarity should
lower drug prices. The Italian proposal is backed by many countries, rich
and poor.

Pharmaceutical companies currently publish only list prices. These are
large, somewhat fictional numbers that are subject to being bargained down.
Just how big a discount governments, insurers and other middlemen can
secure is confidential. Many have concluded that all the secrecy is putting
those who pay for the drugs at a disadvantage. Els Torreele of Médecins
Sans Frontières, an NGO, says that different buyers—even those in the same
country—can be charged widely differing prices. “Prices are kept secret and
buyers are asked to sign confidential agreements,” she says. And despite
the fact that, in theory, poor countries might be charged less than rich
ones, there are concerns that the reverse may in fact be true.

Drug firms are not pleased. The International Federation of Pharmaceutical
Manufacturers and Associations told Stat, a medical-news website, that the
draft resolution would “divert attention and resources from finding
sustainable solutions to access”. Britain, Germany and Denmark are trying
to water down the proposal, probably under pressure from their large pharma
industries—even though they are all facing growing drug-pricing problems at
home. Pharma companies have long argued that the costs and risks of
developing a drug warrant high prices. They argue that greater price
transparency will mean that poor countries will no longer get good deals,
because firms will not want to undermine their ability to extract high
prices from wealthier states.

But the degree to which poor countries get favourable treatment is usually
unknown, except for some high-profile cases: vaccines, perhaps, and
antiretroviral drugs to treat HIV infections. The WHO estimates that 100m
people fall into poverty annually owing to the prices they pay for
medicines. Moreover, there is evidence that the prices charged for some
drugs are, indeed, unreasonably high. A WHO report at the end of 2018, on
cancer medicines, concluded that companies priced their drugs largely
according to their expectations of income, rather than what the drug cost
to make or how to maximise access to patients. That a firm is making as
much profit as possible is, perhaps, unremarkable. However, drug firms are
not ordinary companies. Their products are needed to save lives, and they
obtain monopolies on their drugs through patent systems granted by
governments and, by extension, society.

The WHO also found that, even acknowledging the high cost of developing
drugs, cancer medicines are generating returns far in excess of the R&D
costs, and far more than is necessary to finance and create incentives for
future efforts. It also appears that cancer drugs are more expensive than
other medicines—seemingly because buyers are willing to pay more to treat
terminal conditions. Australian data show that the cost per prescription
for cancer drugs is at least 2.5 times higher than for other medicines.

The pharma industry generates large profits. In America, 12 of the
country’s most profitable drug companies reported more than $29bn in
profits in the first quarter of this year, according to Axios, a news

Advocates argue that transparency will allow people to judge whether
governments have made good decisions about the medicines that they buy. In
countries with weak governance, more transparent pricing should help to
combat corruption.

America has made drug-pricing transparency a priority recently, and
drug-makers must now disclose their list prices even on television
advertisements. (List prices are important to patients because they may
have to pay a proportion of this sum themselves.) Whatever the outcome this
week at the WHA, pharma companies will face growing demands to come clean
about the cost of life-saving drugs.

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org

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