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Pharmaceutical Pricing and Affordability: A Global Perspective

Table of Contents

  1. Introduction

  2. The US Pharmaceutical Landscape

    • High Cost of Insulin

    • Factors Contributing to High Drug Prices

  3. Global Challenges in Pharmaceutical Pricing

    • Affordability Issues in Low- and Middle-Income Countries (LMICs)

    • Impact of Patent System and Intellectual Property Rights

  4. Recommendations to the US Senate on Pharmaceutical Pricing and Affordability

    • Implement Drug Price Negotiation

    • Increase Transparency in Pricing

    • Encourage Generic and Biosimilar Competition

  5. Recommendations to the United Nations on Global Pharmaceutical Pricing and Affordability

    • Support Local Production of Medicines

    • Promote Global Access to Generics

    • Establish a Global Fund for Essential Medicines

  6. Conclusion

  7. References

Introduction

Pharmaceutical pricing and affordability are critical issues that affect the global healthcare landscape, with significant repercussions on patient access to essential medications. High drug costs, particularly in the United States, have prompted urgent debates among policymakers, healthcare providers, and patients. Simultaneously, low- and middle-income countries (LMICs) face their unique challenges in ensuring affordable access to medications. Addressing these issues requires targeted recommendations to national and international bodies like the US Senate and the United Nations.
Also read: Policies and Initiatives to Address Health Disparities

The US Pharmaceutical Landscape

The United States has some of the highest drug prices globally, making medications unaffordable for many patients. A striking example is the cost of insulin, a crucial drug for diabetes management. According to the American Diabetes Association, the average price of insulin nearly tripled from $4.34 per millilitre in 2012 to $12.92 per millilitre in 2019. This steep increase has led many patients to ration their insulin, with severe health consequences and even deaths being reported.

Several factors contribute to high drug prices in the US, including the absence of direct price regulation. Unlike many other developed countries, the US does not negotiate drug prices with pharmaceutical companies, allowing manufacturers to set high prices. Additionally, the complex rebate system between drug manufacturers, pharmacy benefit managers (PBMs), and insurers obscures the actual cost of drugs, making it difficult for consumers to navigate their healthcare expenses effectively.

Global Challenges in Pharmaceutical Pricing

Globally, LMICs face different but equally significant challenges regarding pharmaceutical pricing and affordability. Many of these countries lack the healthcare infrastructure and financial resources to ensure that their populations have access to essential medications. For instance, in Sub-Saharan Africa, out-of-pocket expenditure on health remains high, preventing many patients from affording necessary medications. The World Health Organization (WHO) reports that nearly 2 billion people worldwide lack access to essential medicines, primarily due to high costs.

Intellectual property rights and the patent system further exacerbate these issues by restricting the availability of affordable generic drugs. Many essential medications are under patent protection, preventing the production and distribution of cheaper generic alternatives. This situation is worsened by international trade agreements that enforce stringent intellectual property protections, limiting the capacity of LMICs to produce or import affordable medications.

Recommendations to the US Senate on Pharmaceutical Pricing and Affordability

Addressing the high cost of pharmaceuticals in the United States requires comprehensive legislative action. The following recommendations aim to reduce drug prices and improve affordability for American patients.

1. Implement Drug Price Negotiation

One of the most effective strategies to lower drug prices is to allow Medicare to negotiate directly with pharmaceutical companies. Currently, Medicare is prohibited from negotiating drug prices, unlike other federal programs such as the Department of Veterans Affairs (VA), which pays 40-50% less for medications. By granting Medicare negotiation power, the US can leverage its significant purchasing power to secure lower drug prices.

2. Increase Transparency in Pricing

Legislation should be enacted to increase transparency throughout the pharmaceutical supply chain. Requiring manufacturers, PBMs, and insurers to disclose pricing and rebate information will help patients and policymakers understand the factors driving high drug costs. Transparency can also deter price gouging and promote competition, ultimately leading to lower prices.

3. Encourage Generic and Biosimilar Competition

Promoting the timely entry of generic and biosimilar drugs into the market is crucial for reducing drug prices. Policies should be implemented to eliminate regulatory barriers and prevent anti-competitive practices, such as “pay-for-delay” agreements where brand-name drug manufacturers pay generic producers to delay the release of cheaper alternatives. The Federal Trade Commission (FTC) estimates that ending such agreements could save American consumers billions of dollars annually.

Recommendations to the United Nations on Global Pharmaceutical Pricing and Affordability

The United Nations plays a critical role in addressing global health challenges, including pharmaceutical pricing and affordability. The following recommendations aim to improve access to affordable medications worldwide, particularly in LMICs.

1. Support Local Production of Medicines

The UN should assist LMICs in developing local pharmaceutical manufacturing capabilities. This can be achieved through technical assistance, funding, and facilitating technology transfer. Local production can reduce dependency on imported medicines and lower costs, ensuring more stable and affordable access to essential drugs.

2. Promote Global Access to Generics

The UN should advocate for reforms in international trade agreements to ensure they do not hinder the production and distribution of generic medicines. Utilizing the flexibilities allowed under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, such as compulsory licensing, can significantly improve access to affordable medicines in LMICs. By promoting the use of these mechanisms, the UN can help ensure that intellectual property rights do not impede access to life-saving medications.

3. Establish a Global Fund for Essential Medicines

The UN could establish a global fund dedicated to ensuring access to essential medicines for all. This fund could subsidize the cost of critical medications in LMICs, ensuring that financial barriers do not prevent access to life-saving treatments. Such a fund would pool resources from member states, international organizations, and private donors to provide sustainable funding for essential medications.

Conclusion

Pharmaceutical pricing and affordability are complex issues that require coordinated efforts at national and international levels. By implementing the recommended strategies, the US Senate and the United Nations can make significant strides toward ensuring that all individuals have access to the medications they need, regardless of their financial circumstances. Addressing these challenges is not only a matter of health equity but also a moral imperative to improve global health outcomes.

References

  1. American Diabetes Association. (2019). Insulin Prices Increase. Retrieved from [link].

  2. ABC News. (2019). The Rising Cost of Insulin. Retrieved from [link].

  3. Congressional Research Service. (2021). Drug Pricing in the US. Retrieved from [link].

  4. Health Affairs. (2020). The Complex Rebate System. Retrieved from [link].

  5. World Health Organization. (2020). Access to Medicines. Retrieved from [link].

  6. Médecins Sans Frontières. (2017). Patent Barriers to Access. Retrieved from [link].

  7. World Trade Organization. (2016). TRIPS Agreement. Retrieved from [link].

  8. Department of Veterans Affairs. (2020). Drug Price Negotiation. Retrieved from [link].

  9. Kaiser Family Foundation. (2020). Drug Pricing Transparency. Retrieved from [link].

  10. Federal Trade Commission. (2021). Pay-for-Delay. Retrieved from [link].

  11. UNIDO. (2018). Pharmaceutical Manufacturing in Africa. Retrieved from [link].

  12. World Trade Organization. (2021). Compulsory Licensing and TRIPS. Retrieved from [link].

  13. Global Fund. (2020). Funding Essential Medicines. Retrieved from [link].

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