Introduction
Selling drugs is big business and more so in the United States where the pharmaceutical market is worth several billions of dollars. But Americans pay higher drug prices than consumers in other countries. Boston University researchers have found that prices in Canada and Europe are just half to two-thirds of U.S. prices (Harrison, 2004). With shrinking health insurance, many people are finding it difficult to afford drugs and consequently proper healthcare. Drug companies argue that drugs cost more mainly because of the risks and research and development efforts that go into it.
Thesis: It is often debated whether the high cost of drugs in the United States is justified or not; the high cost of drugs in the United States is totally justified when one considers the expenses involved in producing drugs and the benefits accrued as a result of drugs.
The rapid rise in research and development (R&D) costs are largely due to an increase in costs of clinical testing. Clinical testing costs are highest in the “post approval” research and development – this refers to clinical studies performed after FDA approval, known as Phase IV – which are often mandated in the case of drugs that are put on a fast track for approval (Moran, 2003). Most of the drugs on fast-track approval used to be those used to treat life-threatening conditions such as cancer or AIDS.
But now, more drugs are put on the fast track for approval even though they may not be used to treat life-threatening conditions (Harrison, 2004). In 2004, 13.2% (US$4.9 billion) of R&D expenditures by American pharmaceutical firms was spent on phase IV trials (Gagnon and Lexchin, 2008).
Main body
Christopher F. Koller in his article titled “Why Drug Prices Keep Exploding” says there are six elements that play a huge role in the financing and delivery of healthcare: product development: product development, marketing, differential pricing, and cost responsibility, patent protections, political spending and technological imperative (Koller, 2001). Huge costs are involved in the research and development of new drugs. Once a drug is developed, it needs to be marketed.
Gagnon and Lexchin (2008) have found that pharmaceutical companies spend almost twice as much on promotion as they do on R&D. Third party insurance coverage has created opportunities for differential pricing by the industry (Koller, 2001). Legally, Medicaid gets the lowest price and the common citizen has to pay double that of Medicaid. The company must protect its privileged position through patents (Koller, 2001). There is also the need for political lobbying to have favorable laws passed. In 2003 alone, the industry spent nearly $116 million lobbying the government (Ismail, 2005). Finally, people have a tendency to depend on pills for all ailments. All these factors explain the high prices of drugs.
Americans are spending $200 billion a year on prescription drugs, and that figure is growing at a rate of about 12 percent a year (Angell, 2004). It has been argued that this is mainly due to the high prices of drugs. But then, an increase in drug spending does not necessarily reflect the rising cost of drugs. It reflects, in almost equal parts, the fact that people are taking a lot more drugs than they used to, that those drugs are more likely to be expensive new ones instead of older, cheaper ones and there may be neglecting alternate easier choices (Angell, 2004).
Another argument against drug pricing is that drugs cost less in other countries despite R&D and marketing costs. In this context, one may point out that the U.S. pharmaceutical market is different from the global pharmaceutical markets (Harrison, 2004). If the former is characterized by strong patent protection and enormous R&D budgets, prior to the mid-1990s most countries outside the G-7 offered little or no patent protection for pharmaceuticals and virtually zero investment in pharmaceutical R&D (Harrison, 2004). Hence comparisons of pricing of drugs in the US and in the global market are not acceptable.
Prices of drugs are justified when one considers the benefits of new drugs that are introduced as a result of expensive research and development. Etanercept is a new drug to treat children with psoriasis thereby giving them a better quality of life (Paul, 2008). Likewise, it has been found that a new drug, dexmedetomidine can provide better sedation and analgesia without side effects (Gallagher, 2007). Two experimental osteoporosis drugs –denosumab and odanacatib are the first biologic drugs to treat osteoporosis (Hitti, 2008). New drugs by improving the length and quality of human life justify their pricing.
Conclusion
All factors considered, the high prices of drugs in the United States are justified and it is important that people realize and accept it. A small printed pamphlet with the costs involved in producing the drug may be given along with the drug so that people understand why they are paying so much for the drug. Drugs, especially the higher priced ones should be covered through Medicaid and health insurance, and drugs for fatal diseases should be provided totally free. Moreover, by outsourcing some tasks of the drug manufacture process, such as clinical testing, it may be possible to bring down costs reasonably.
References
Angell, Marcia (2004). The Truth About the Drug Companies. The New York Review of Books. Volume 51, Number 12.
Gagnon, Marc-Andre and Lexchin, Joel (2008). The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States. PLoS Med, Volume 5, Issue 1.
Gallagher, Laura (2007). Intensive care quality of sleep improved by new drug, reports study. News Release: Imperial College, London. Web.
Harrison, Scott Christopher (2004). The Politics of the International Pricing of Prescription Drugs. Praeger Publishers. Westport, CT. 2004.
Hitti, Miranda (2008). New Osteoporosis Drugs in the Works. WebMD. Web.
Ismail, Asif (2005). Special Report: Drug Lobby Second to None. The Center for Public Integrity. Web.
Koller, F. Christopher (2001). Prescription for Trouble: Why Drug Prices Keep Exploding. Commonweal, Volume 128, Issue 12.
Moran, Mark (2003). Cost of Bringing New Drugs to Market Rising Rapidly. Psychiatric News. Volume 38, Number 15.
Paul, Marla (2008). Improved Quality Of Life Offered By New Drug For Children With Psoriasis. Medical News Today. Web.