Content area
Full Text
Key Words prescription drugs, price discrimination, pharmaceutical research and development, drug price regulation
Abstract This paper addresses how and why drag prices differ across countries. Studies of international variation in drug prices reach varied conclusions owing to methodological and data disparities. Price differences do exist across countries, with the United States footing the highest bill, but the differences are not nearly as large as they appear at first glance.
The higher prices in the United States are concentrated among a subset of brandname drags and among those without insurance covering drags. Some U.S. health plans obtain price concessions from manufacturers similar to those obtained by national governments. Price concessions occur whenever purchasers are willing to let price be a consideration in decisions about access and utilization.
In low-income countries the vast majority are unwilling to pay for effective drugs simply because they are unable to pay. Low-income nations need more price discrimination-and vastly lower prices-if they are ever to afford the world's most effective medicines.
INTRODUCTION
Different people pay very different prices for the very same prescription drug. Those price differentials exist across countries and across classes of consumers within specific countries. When consumers learn of such differences they are often perplexed and even angry. Those who pay higher prices feel cheated, especially when they are less affluent or more vulnerable medically than those who pay less. In other situations, policy makers argue that drug prices should vary more widely across countries by lowering prices in countries with the lowest incomes to provide better financial access to life-extending drugs.
Understanding the magnitude of drug price differences that exist today, the reasons for those differences, and the economic and political arguments for or against changing the present pricing structure is important for the current and future health of the world's population. Because prices affect the revenues of drug companies, and the potential for future revenues is what induces investment in new medicines (35), public policies that alter the pricing structure for existing drugs can have important impacts on what gets developed and what does not.
This paper addresses three questions: (a) How do drug prices differ across countries?, (b) What accounts for those differences?, and (c) What are the arguments for changing the distribution...