Experts Lounge
The American pricing system different from many others
In the case of the UK, the Netherlands, and Spain, the government through a regulatory framework negotiates with pharmaceutical manufacturers about how much they will pay.
Each country uses a different process to balance drug companies’ pursuit of profit with the public’ s interest in making useful treatments widely available and affordable.
This process takes into account the therapeutic value offered by the drug at the cost to which this product is proposed to be offered by the manufacturer, providing a uniform scale of measure in terms of cost-effectiveness.
UK, for instance, runs its process through the National Institute for Clinical Excellence( NICE). The role of NICE is to determine at what point a new treatment is cost-effective; it conducts many analyses each year, on drugs and surgeries and scanning devices. Through its findings, it advises manufacturers the price the government is willing to pay for the product or service.
... in Kenya and many other African countries, there are no legal or regulatory provisions affecting the pricing of medicines...
In the US, there is no such negotiation process; in fact, the Federal law bars Medicare, the country’ s largest insurance plan, from negotiating any discounts with pharmaceutical manufacturers. For US, once a pharmaceutical company sets its price, Medicare is required to accept it.
In Kenya and many other African countries, there are no legal or regulatory provisions affecting the pricing of medicines.
In this regard manufacturers are free to vary their prices subject to what the market can take up. With the deepening and expanding scope of coverage by NHIF as well as growth of private health insurance schemes, pharmaceutical companies may be tempted to increase prices, especially for products still under patent protection, in order to exploit the opportunity to grow revenues. The US case must be seen as a warning in this regard.
Take homes from the US
1. While lack of life-saving medicines has been a feature in resource – constrained settings for many years, the recent trend of escalating prices of pharmaceuticals has started to hinder access in industrialised countries too.
2. Monopolies increases prices and limit access. Monopolies caused by patents on new medicines or where there is only a single producer for an older off-patent neglected medicines, which is now used as specialty medicine, are the most important reasons for high prices and lack of affordability and access to essential medicines.
3. In markets which lack regulatory mechanisms for price determination, the price of medicines is neither related to research and development nor to production costs. Under these circumstances, pricing of medicines reflects what the unregulated market can afford to take up.
4. Lack of access to medicines include the extent essential drugs are not available and or not affordable for patients who need them. For instance, pharmaceutical companies consider orphaned diseases not to be viable commercially owing to the small number of potential users; in the event a company opts to produce such medicines which target narrow markets, they would price them very high. This is one of the factors driving the escalating costs in many markets.
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