Editorial – Across border drug prices a difficult task

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Editorial – Across border drug prices a difficult task

Comparing the prices of medicines across borders is an intellectual challenge for academics, a profitable business for consultants and a difficult issue for pharmaceuticals companies. Growing concern is appetite for the practice among healthcare systems in richer and poorer countries like.

Recent efforts by the Chinese government to step up scrutiny of drug prices reflects spiraling domestic healthcare costs as public and private demand for improved health grows, against a background of growing tensions over the industry’s past commercial appraoches.

As healthcare spending comes under increasing pressure in the drug industry’s large traditional markets in North America, western Europe and Japan, fast growing countries like China have become ever more important source of revenues.

Some emerging countries’ willingness to pay western prices for innovative medicine to help build domestic industries, combined with the fact that medication in such markets are often paid for by the patients themselves, creates an environment conducive to higher drug prices.  This is worrying Chinese regulators.

There is a concern over the quality of domestically produced drugs in Pakistan and a willingness to pay higher prices for imported versions.

Higher production standards, overheads, currency risks, local regulatory requirements and industrial policies demanding investment in domestic production plants all add to the costs for multinational companies in many developing countries.

Kare Schultz of Novo Nordisk, Denmark pointed out that genetic differences and variations in average body mass make international comparisons of insulin prices difficult. He says typically prices are highest in the US and Japan, and “somewhat lower in Europe” which is closer to prices charged in China.

But even gathering consistent data on costs is very difficult. In China, for instance, there are different prices for public and private sector procurement, for medicines on the “essential drugs list” and additional costs for patients imposed by regional and local health systems.

More broadly, western drug companies have been concerned about selling their products at too great a discount in emerging economics for fear they will be re-exported into richer countries. They fear even making their prices public risks triggering demand for similar cuts in other, in more expensive markets.

The same processes are taking hold in more developed markets. The publication of cost effectiveness analyses of medicines by organizations such as the UK’s National Institute for Health and Care Excellence (Nice) has led to an increasing number of confidential discounts to health systems in Europe.

In China, where the authorities are ever more commissioning and examining such studies, Ms Cheng says officials are now increasingly keen to “squeeze out the water” of excessive additional costs to pay for aggressive marketing and alleged corruption.

The trade-off for drug companies is rising demand for their medicines through an expanding official healthcare system. In the coming months and years, for western manufacturers, deeper discounts are likely to become the price of doing business in China.