Drug Pricing Group3 SecA

8/12/2019 Drug Pricing Group3 SecA

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Group 3,Section A


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Factor affecting drug pricing in

international marketsPatent protection: On the supply side, the government grants patentsto pharmaceutical producers to help maintain product innovation.Patents help drug firms cover the fixed costs of research anddevelopment by providing significant market power to individual firmsin setting pricesResearch & Development : Research and development costs includeinitial investments, product liability costs, uncertainties in returnbecause of a dependence on consumers in the market etc.

Buying power of large purchasers versus smaller ones(monopsony power): On the demand side, large and smallpurchasers have varying degrees of market power. For example, largeconsumers such as HMOs, PBAs, government programs, or other suchgroups arguably have more bargaining power in drug purchases thando individual retail purchasers.


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Factor affecting drug pricing in

international marketsDifferent price controls and other regulations acrosscountries : Market regulations affect both the supply anddemand sides, and vary significantly across countries. Direct and

indirect price controls limit the amount of reimbursementsavailable to drug producers, and other controls limit profits,coverage, and other factors affecting pricesPerceived therapeutic outcomeExchange RateCost of marketing & distributionDemand for the pharmaceutical products


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Is consumer the ultimate loser?

Better purchasing power than developing countriesBetter reimbursement under mediclaim policies

However, generic and life-saving drugs should be soldat subsidized rates Affluent countries have to compensate for otherdeveloping and middle-income countries

Companies can restructure cost model - They spendonly 1.3 percent of revenues on basic research and 5 to13 percent on clinical research, compared with 20percent on advertising .


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Counterfeit products and grey

marketing of drugsSignificant cross border price differentials often attract many small andmedium pharma manufacturers to counterfeit and parallel trade.

Factors contributing to counterfeit drugs:Lack of enforcement of existing laws. Weak penal action.High remunerative trade Ability of improved printing technology that helps counterfeitingLack of control by exporting/ importing countries.

Too many wholesale and retail outlets. Widespread corruption and conflicting of interests.Lethargic regulatory authorities.Undervaluation of human life.


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Indias counterfeit drugs market Indias pharmaceutical industry is fourth in the world in terms of production volume, and over 66% of its products are exported to highly regulatedmarkets. According to some studies, fake drugs make up 20% of the pharmaceuticalmarket in India, includes vital medication like cough syrups, painkillers, andeven vitamin supplements.Most cases of fake and spurious drugs in the local market were found in Bihar, West Bengal, Uttar Pradesh and Gujarat.The health ministry estimates that 5% of drugs in India are counterfeit, while0.3% are spurious.Happen beyond jurisdictional borders, creating greater obstacles to successfulanti-counterfeiting enforcement.Guidelines by international bodies such as the WHO to help mitigate the flowof illicit medicines unsuccessful due to inadequate infrastructure or financialresources

Combating fake medicines requires increased collaboration at national,regional, and international levels.


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Counterfeit products and greymarketing of drugsEffects on healthcare:

Inevitably hamper the goodwill of the companyPatient will not be able to procure the right medicine, makingtreatment difficultPrevents foreign pharma companies from entering India by spoilingsentimentGrowth of resistance to existing anti-infectives from use of sub-partreatmentsSpread of drug resistant pandemics, including HIV and influenza

Use of illegal funds to finance further illegal manufacture of medicinesand even terrorismThreat to pharma company revenues and discourages innovation andR&D


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AIDS Drug PricingNo, differential pricing should be done.Newer drugs that are more effective against the AIDS virus are tooexpensive, costing up to 15 times more. When these drugs are supplied for OTC (over the counter ) sale, they cancharge higher prices. However, when providing these drugs for governmentprogrammes and schemes they should follow differential pricing and offerall life-saving drugs mandatorily at subsidized rates. Certain such examplesalready exist e.g. DOTS treatment for tuberculosisDoctors Without Borders urged the United States and 11 other countriesnegotiating a Trans-Pacific Partnership not to sign the free-trade pact.

World Health Organization's new guidelines, which recommend earliertreatment for adults, means that an additional 9 million people indeveloping countries will now be eligible for treatment.Scaling up HIV treatment and sustaining people on treatment for life will dependon bringing the price of newer drugs down.


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TRIPS FlexibilityIn India , only processes can be patented.Genes cannot be patented as it just amounts to an analysis and notdiscovery e.g. BRCA gene testSmall insignificant changes in composition and processes promote ever-greening of patentsSupplying generic drugs via reverse engineering is beneficial to the masses 60 % of essential medicines are not accessible to people in Africa, South-East Asia and the Western Pacific.Often only medicines like analgesics are manufactured in developing

countries, while remedies for life-threatening diseases like TB or HIV/AIDSare imported, and therefore much more expensive.Supply-chain management tends to be poor in developing countries, whichresults in shortages and product deterioration, for instance, when vaccinesare stored too hot or too cold.

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Drug Pricing Group3 SecA