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Re: E-DRUG: Costs of developing drugs

David Henry states that:

>  However General Motors don't tell me that because of the high
> development costs they are raising the price of the new vehicle by
> $2000

GM may not say that explicitly (although I'm sure I've read 
statements to that effect), but it remains a fact that the consumer 
_must_ pay the development costs in the price he pays--who else? In 
some countries and cases the government may contribute, but who's 
paying then? The taxpayer of course! Is that any more equitable?

Implicit in the argument is concern that some drugs have an 
effective monopoly, particularly early in their life. This was the 
case for AZT in the '80s. Once competitors started to appear, the 
price of AZT did indeed start to fall--though not by perhaps as much 
or as fast as many would like to have seen. I agree that we do need 
to address this concern, but I don't agree that government control of 
pricing is the solution. How could anyone have put a 'reasonable' 
price on AZT in 1986?

I am interested in the comment:

> If a manufacturer brings (for instance) a new NSAID to us, it will
> get a higher price only if it can be proved to be more efficacious,
> or has fewer serious side-effects, than its comparators.

This is clearly a matter that _should_ be addressed by the
market--why would anyone pay much more for a product which
demonstrated little improvement on its predecessor? The fact is that
they often do, but I submit that the medical profession must accept
at least some of the responsibility for this, in prescribing the
'state-of-the-art', when the generic would be equally effective.
Also (and in parallel with discussions in this forum about
'direct-to-consumer' advertising), how can we provide the information
to the consumer which will allow him or her to take a part in the
decision of choice of drug as he does in choosing the car.

I always have concerns with allowing supposedly beneficent
governments a controlling role in market matters--I know some
do point to successes in this, but the general experience has been
that long term government intervention in the market leads to
inefficiencies--and higher cost or less innovation. I have said many 
times that we first need to understand much more clearly the 
commercial background to cost, price and marketing. Only then can we 
expect to discuss these matters on the same level with the drug 
company chiefs.

I know that many in the medical profession and some activists have
resisted such approaches and some view it as 'siding with the
enemy', But I do fear that suggesting that the automobile companies
do not recoup development costs in their selling price lays us open
to ridicule.

Chris W. Green (chrisg@rad.net.id)
Jakarta, Indonesia
Tel: +62-21 846-3029  Fax: +62-21 846-1247

[Moderators comment: In many countries the government plays a dual role as
a regulator and as a purchaser. As I understand the Australian situation
drugs may be registered on the basis of safety and efficacy for sale in
Australia by the Therapeutic Goods administration. But there is another
body which regulates the Pharmaceutical Benefits scheme (PBS) which
reimburses drugs dispensed to over 90% of Australians. This body uses
pharmacoeconomic criteria to say that they will only agree to reimburse a
specific drug if it's price is $X. If the company wants to sell the drug at
$X+ 50% it can do so if it is registered but the drug would not be
reimbursed by the PBS. This is an approach which could be used by large
insurers or government organizations such as the Veterans Administration
here in US. The advantage of this whitelist approach is that it does not
prevent a safe and efficacious drug being used but it does allow the
consumer representing organization to use rational price setting mechanisms
to decide what will be paid for a specific drug by comparing that drug with
similar ones in terms of therapeutic efficacy. 
I would welcome more detailed comments and input from our many Australian
E-DRUG members. If I have misreported the Australian system please correct
me! Richard Laing Co-Moderator]
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