by Winston Liauw

Created on: June 16, 2007

Both the pro-Government and pro-Patient supporters seem to agree that at the end of the day it is the consumer that pays, whether directly, via their insurer or through taxation. In countries where the patient is more likely to pay directly then there is rationing by default, i.e. the poor can't afford the drugs. In countries where the majority of medication costs are undertaken by the government then there is rationing through regulation. In the latter case, whilst some limitations on access to medicines can occur it is in circumstances where equity, the greater good, is deemed the priority. It is worth noting that in countries where governments have an input into drug pricing the overall cost of drugs tend to be lower: Australia and Canada being notable examples. Meanwhile in the United States consumers and other purchasers of medicines (state-based health providers, HMOs)have recognized that they need to increase their bargaining power lest they are priced out of the market.

So there are a number of alternate questions that need to be addressed. These include:
- how are drug prices determined in the first place?
- how to we determine if we are getting value for money ?
and
- how do we minimize costs whilst maintaining a viable pharmaceutical industry?

Although the development of medicines is for the benefit of mankind there is also little doubt that there is a capitalist imperative that drives innovation in the pharmaceutical industry. The industry claims that high drug development costs require high drug costs to achieve adequate return on investment. The methods used to determine the true costs of drug development are not disclosed and furthermore it is well recognized that substantial portions of drug development costs are often carried by the government through the participation of academia in the development process. In turn the pharmaceutical industry has for the most part been successful in achieving government support for policies that allow pharmaceutical companies to essentially maintain monopolies in their chosen field of commerce. These areas include excessively restrictive and prolonged patent protection and policies that limit the wider use of generic medications and the free trade of medications across borders.

The real role for government is to exert greater control over price regulation both through review of the cost-effectiveness of new medications. This model is successfully applied in Australia through the Pharmaceutical Benefits Advisory Committee. In addition policies such as those that relate to intellectual property need regular review. Finally governments should promote Quality Use of Medicines (QUM) practices that mean that over time the overall cost of medicines to the population of consumers, whether they be individual patients or governments, be brought under some degree of control.

To date, individual consumers or patients have had little influence over pricing policy and it requires more powerful government bodies and non-government organizations to counter the strength of the pharmaceutical company lobbyists and achieve lower drug costs for everybody.

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