Thursday, June 02, 2011

Drug price control 9: More comments on single pricing per drug

After posting Part 6, Exploring just one price for each drug last week, I received several feedback and comments from some friends. Here they are.

1. I agree with you. There is a fundamental problem with some NGOs, they do not do critical analysis, or is it the government who also does not do this. -- Dr. G.

2. Thanks for sharing your paper. It's a bit disconcerting that despite the wealth of knowledge out there about medicines and data that supports the folly of price control, there are still random ideas that linger and sadly will never address the issues of access. -- Ms. V.

3. Thank you so much for sharing your latest paper on single pricing for drugs. Having hospital pharmacy as my background I am very much aware why medicines are priced higher as pointed out by Dr. A. Bengzon. I also fully agree with the points you and Dr. Jimenez raised.

Big chain drugstores enjoy bigger dicsounts and get more incentives because they buy in bulk. Likewise government hospitals get their drugs and supplies at very low costs that private hospitals are not entitled to. Operating costs for private hospitals are higher. And to stay in competition upgrading of equipments and offering of better services and programs are needed to stay alive. Having said these how then can I support single drug pricing. I hope a more comprehensive study be done on this issue. -- Ms. L.

4. It is not fair, not correct, to compare pricing of Coke and drugs. Coke or other commodities can have different prices because they are not necessities, thus consumers can easily choose the cheaper shop or outlet. Drugs are different, they involve public health, they should be treated differently and their pricing should have the narrowest range as much as possible. -- Randy

5. I partly agree with all this need for profit for those who really do the hard stuff of researching and inventing and producing drugs. But what makes it expensive is the unnecessary spending on marketing and the so many layers of sales and marketing people and advertising models and copyrights that make the whole system too expensive and has veered away from the original objective of the inventor - to help cure diseases and to profit from it as well. In the end the shareholders' interest become supreme and that is where all these evils go in. In return the Pharma Execs and the investment companies Execs earn far too much than the poor inventor who may have some altruistic motives in addition to his quest to earn a living. More often than not he does not even get to own the patent or share from the royalties of his discoveries. It is the avaricious Investment and Pharma Companies Execs who gets to holds the hen that lays the golden eggs!

Inventors do have a right to profit from their operating costs and research costs and production cost. Investors do have a right to profit from their investments - but for how much and for how long? -- Floro.

I thanked the first 3 commenters above. I did not reply back to them anymore. Here are my rejoinders to #4 and #5 last week, below:

On #4, Food are also necessities. For me, plenty of (especially nutritious) food are the best "medicines" because they are preventive, not just curative. People accept different pricing of the same food (rice, vegetable salad, spaghetti, adobo, etc.) from different food outlets, they do not demand "same price for each food." Since there are different input costs in the selling and dispensation of drugs by different outlets (from hospitals to modern drugstores to ordinary, non-air con village drugstores), then there will be different output pricing for each drug outlet.

If prices are to be kept at a single, uniform price -- a de factor drug price control for each drug preparation (brand at a particular dosage) and not just for each drug molecule (ie, the generic name) -- then some drugstores will stop providing better services for the consumers. Like remove the air con or keep it at low cool even at noontime, reduce lighting, hire low-paid and less-trained pharmacists who work long hours with no overtime pay, etc. just to keep the costs as low as possible. Cutting the air con will later adversely affect the quality of certain drugs that require a certain low temperature range.

On #5, Floro identified possible causes of high medicine prices -- unnecessary spending on marketing and the so many layers of sales and marketing people and advertising models and copywriters.

I think that all products and services, especially for technical products like a new car (new engine power, new safety measures, etc.), a new airplane and chopper, a new laptop, a new camera, a new cellphone, a new drug, etc., would somehow need some marketing and advertising. How would ordinary mortals like you and me be first, made aware of their existence, and second, be aware of their properties, functions, user-friendliness, price, etc., compared to competing products?

Companies and entrepreneurs should be left alone on what mixture of production cost, marketing and advertising cost, they will employ. Let some companies over-spend on advertising and lose money later due to the high price of their products compared to products by other competitors. Governments have no role in regulating how much price those companies can charge, or in regulating the kind of advertising and advertising cost they can employ. The role of government is to promulgate the rule of law. Someone got bad allergies or died after taking a particular food, drink or medicine. Government comes in to investigate and try the case/s quick, then punish hard the perpetrators of such crime once proven guilty. The quickness of the justice system and the certainty of punishment if proven guilty -- no exemption from the law, no one can grant exemption from punishment -- is the best regulation that government can do.

On the "how much, how long" is the profit for new inventions. How long is fixed, 20 years patent life for a newly-discovered drug molecule, 50 years copyright after the death (I think) of the song composers and inventors. In the case of drugs, the various clinical trials and compliance with government food and drug administrations (FDAs) regulations take up about 10 to 13 years of the patent life, according to industry figures that I've read. So the "profit period" is only 7 to 10 years out of the total 20 years patent life.

As to "how much" profit, again, let us leave that to the companies themselves. If we care "how much profit" those companies can make, do we also care "how much losses" they can make too? Capitalism and entrepreneurship is about profit and losses, expansion and bankruptcy. Some if not many of the "biggest" companies in the country and the world just 20-30 years ago are perhaps just medium size companies by now. A few may have been gone already. Like Lehman Brothers in the US, like Pantranco, BLTB and Grand Air in the Philippines.

See also Part 7, Pricing by drug inventors

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