Rising Cost of Pharmaceuticals

Updated: May 22, 2019

Across the globe the price of pharmaceuticals has continued to rise, causing governments to have to find a way to assist the public. The articles “Pharmaceuticals” by Catherine Matraves and “Pharmaceuticals Advertising: Overview” by Ann Griswold suggest some factors for the increasing price of medications such as research & development, advertising, and who purchases the drug. According to Douglas Busvine and Zeba Siddiqui in “US fears for patents on next-generation drugs in India,” one way countries have combatted this is with patent infringement and having generic production of the medications. Low-cost medications could be a global reality if pharmaceutical companies did not regulate the cost of these drugs.

One factor for the price increase of pharmaceutical drugs is research and development. According to Matraves, as government regulation increased, scientific techniques developed, and focus shifted onto other areas of treatment, the price for drugs shot up. Government regulations were used to increase the amount of time spent developing a drug, and the number of clinical trials required (“Pharmaceuticals”). Due to the increased amount of requirements, the company has less time to sell their product while still being protected by their patent. Another reason for the increase in price is the shift in research. Companies are spending more time researching chronic diseases such as Alzheimer’s, affecting how much money is spent on research and development (“Pharmaceuticals”). For a company to develop a new drug, the price increased from $231 million in 1987 to $897 million in 2003 (“Pharmaceuticals”).

Advertising and who the main purchaser of the drug is are also important to the price of the drug. Reportedly, pharmaceutical companies can spend anywhere between 20 and 30 percent of their budgets on advertising their drugs (“Pharmaceuticals Advertising: Overview”). Between the years 1996 and 2006 the expense of direct to consumer advertisements by drug companies increased from $985 million to $5.4 billion (“Pharmaceuticals Advertising: Overview”). Aside from advertisement, it is important to understand who is purchasing the medication. Governments receive a lower price than the individual patient, therefore in countries where the government supplies health care there are cheaper prices for medication available to the patient (“Pharmaceuticals”). The few countries that do not have government regulation over the price of pharmaceutical medications include the United States, Germany, and the United Kingdom . These countries therefore have less control over the price requested by these companies because they are not the main buyer of the drugs in their country like the Japanese government (“Pharmaceuticals”).

The Indian government is a main purchaser of the drugs in their country; however to further reduce the cost of supplying medication for their vast and growing population, they have participated in patent infringement. After investigating several drugs, the Indian government requests the blueprint to have the prescription drug recreated by generic companies (“US fears for patents on next-generation drugs in India”). With only 15% of the 1.2 billion people living in India, it can be considered a necessary step to help insure and maintain the health of the Indian population (“US fears for patents on next-generation drugs in India”). This activity is costly to pharmaceutical companies because they are losing out on potential sales profit, but it considerably lowers the price of the medication for the patient because the drug can now be made by a low-cost generic company. The United States is concerned over how this series of patent infringements will affect the future generation of drugs due to the amount of money invested in the research of medication. They imply that further infringement on patents will result in less companies conducting research due to lack of confidence in the return in their investment (“US fears for patents on next-generation drugs in India”).

I believe a low cost plan for medication could be achieved, but it would require patents to be almost nonexistent for some time. The main reasons for the increase in prices is because of the control pharmaceutical companies have because of their patents. Without the patents, generic companies would also be allowed to create these drugs. Competition serves well for the prices in goods that are sold in a market. This may cause these companies to collapse however due to the reduced amount of profit (“Pharmaceuticals”). As mentioned before, there may also be a reduced amount of research done on diseases and developing medications because companies will not be sure if they will make more than they put into the research.

As technologies advance, the cost of pharmaceuticals continues to increase and countries are looking for ways to safeguard their citizens from the high prices. The three articles discuss the factors that influence the price of prescription drugs which are increase in cost of the research and development stage, advertisement, and who is purchasing the drug. They also address briefly the issues that can come about from patent infringement. Without as many patents there would be a good chance for low-cost medication to be a global reality.

Jewelz Lopez

Caldwell University

27 March 2017

Work Cited

  1. Busvine, D., Siddiqui, Z. “Us fears for patents on next-generation drugs in India.” Reuters, http://www.reuters.com/article/india-us-pharma-idUSL3N0M32DH20140306. Accessed 28 Mar 2017.

  2. Griswold, Ann. "Pharmaceuticals Advertising: Overview." Points of View: Pharmaceuticals Advertising, 3/1/2016, p. 1. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=pwh&AN=43287275&site=pov-live&scope=site.

  3. Matraves, Catherine. "Pharmaceuticals." The Princeton Encyclopedia of the World Economy, edited by Kenneth A. Reinert, and Ramkishen S. Rajan, Princeton University Press, 1st edition, 2010. Credo Reference, https://caldwell.idm.oclc.org/login?url=http://search.credoreference.com/content/entry/prewe/pharmaceuticals/0?institutionId=1465. Accessed 29 Mar 2017.

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