The pharmaceutical pricing landscape is by the most convoluted system and the main culprit of this is the USA. The pricing structure of the pharmaceuticals is by no means transparent and requires governmental action to tackle this problem.
The United states represents the largest and most attractive pharmaceutical market in the world. Given that the USA is the largest market in the world Americans seen to pay more for brand name prescriptions than anyone else in the world, due to substantive prices associated with research and development. Secondly, drug prices are much higher in the US compared to other industrialised countries, is in fact due to the US lacks a national healthcare system that directly negotiates with the pharmaceutical industry, but instead most negotiations occur between pharmaceutical companies and private insurers or vendors.
The pricing of pharmaceuticals remains a hot topic amongst pharmaceutical companies whereby government intervention is key to help reduce prices of pharmaceuticals.
Pharmaceutical Pricing Strategies
Pharmaceutical companies can use many different pricing strategies depending on the type of drug, the goals of the company, the competition and the size of the market.
The size and selling pricing structure of pharmaceutical products is very specific there are four main methods that can be used to set drug prices; cost-based pricing, value-based pricing, competition-based pricing and price skimming. Each of the mentioned pricing strategies are followed based on goals set by companies and countries.
The need for transparency in pricing is paramount for pharmaceutical companies to adopt a consistent method when setting the prices of their medicine. The net prices of pharmaceuticals varies immensely in the United states as it is a multi-payer landscape. However, information such as undisclosed discounts remain confidential and much of this information is scare for the USA.
What interventions are governments implementing to reduce prices?
Due to the limited information on discounts available to the public, the US government has considered several strategies to reduce prices, such as the introduction of new international pricing index methods to bring prices closer to that of other countries.
Additionally, other methods in place have been led state legislation to tackle drug prices. The following states: California, Nevada, Maryland and New York are implementing new legislation that attempts to provide transparency in pricing and possible indirect regulation of prescription drug prices. An overview of the following states in the USA are in talks with legislation changes in table 1.
The US congress has devised a legislation which consists of several different bills, all aimed at reducing drug prices in the Unites States. The following 3 bills have been proposed in government:
- Introduced by Senator Sanders; permits the secretary of Health and Human Services to negotiate lower prices for drugs under the Medicare part D directly with drug makers and manufacturers.
- Bill introduced by the Representative Elijah, would allow the possibility for Americans to import lower priced drugs from abroad and to be able to combine price of prescription drugs in the United states to five other countries- Canada, UK, France, Germany and Spain.
- To open generic competition to patent protected United states branded medicines that are deemed extortionate.
In addition, pharmaceutical companies are under pressure from the FDA to shorten the period of approval for new drugs to enter the market and are in due consideration of reducing drug costs. This infers that companies need a strategic plan and a system of clear pricing structures. If anything, the challenge pharmaceutical companies face seems to be mounting especially in the US, the biggest market for prescription medicines.
In this short article, it is easy to see the contribution of governmental intervention associated with pharmaceutical prices across the spectrum as whole. The current plans and bills set in place are still at its infancy however it is best to remain positive and should be closely monitored in the coming years ahead to a more transparent pricing system in the US.
Donohue, J.M., 2014. The impact and evolution of Medicare Part D. New England Journal of Medicine, 371(8), pp.693-695.