Solving The European Model Of Reference Pricing

Generally consumers have very little bargaining power as medication is prescribed. Apart from US where there is pricing flexibility, governments in other markets enjoy substantial pricing leverage.

The rise in drug prices is causing the public to ask why this is so and why there isn’t anything being done, or what the reason could be for sky high prices. Some of the reasons include pharmaceutical companies setting their drug prices

Shortages of prescription drugs in the United States are a serious threat to our nation’s health and safety. At first blush, this problem appears fairly simple and straight forward to solve. In reality, there is a complex web of causation with a number of root causes contributing to drug shortages. The aim of this paper is to answer the question: How do we mitigate prescription drug shortages? This discussion is written from the standpoint of advising the current presidential administration how to address this crisis. This essay begins with a discussion regarding the background of the issue. Next, the landscape, including stakeholders in this matter is identified. Following, political, social, economic, and practical factors surrounding

Competition is one of the major reasons why companies cut the prices of their products and services. If other companies were to charge high prices for their products, this would mean that by reducing prices, the company would attract more customers. Pricing of medicine in most cases does not depend on the available resources, but rather, a decision by the manufacturer.

Prescription drug prices are on the rise in the United States. Currently, the United States does not implement a price control on prescription drugs. Every day the supply and demand for prescription drugs fluctuates. Pharmaceutical companies produce drugs that are necessary for survival. Therefore, it is necessary for research and development to continue in the United States. Those suffering the effects of exorbitant prices must do so until a generic form of a prescription drug is produced. Once approved by the FDA, new drugs will make their appearance on the market and patients will no longer suffer financially. Until then, it is necessary for pharmaceutical companies to price their drugs based on the idea of supply and demand. This produces the profit used to fund research. Price controls discourage innovation. If a price control were set in place, of course the price of prescription drugs would decrease. However, the development of new drugs decreases with it. Today’s generation would benefit from lower prices, while future generations would suffer from the loss of drug innovation.

Even if reference pricing when brought to market did work effectively without stifling innovation, the process of creating a new act to instate a reference pricing law would be far too long and drawn out to make such a risk worthwhile. Just getting such a bill to the point where Congress would vote on it would be a long and winding road of pushing the bill through committees and rewriting parts of it to get the house and senate to even consider passing it, likely taking close to a year if successful. And even getting to the voting stage, such a bill would have a very low chance of passing through Congress. This is because, as Mundy states, “Big Pharma’s power over lawmakers in both parties,” makes it extremely difficult for such a bold

Market failure appears when there is a failure in allocation of goods and services. When the market is unsuccessful, the government is called to intervene and correct the failure. Over the years, government participation in the pharmaceutical market has been more wide-ranging than any other good or service. With the government’s ability to regulate, mandate, inform, finance and provide, their intervention to overcome market failure can be beneficial for the economy. Market failure plays a significant role in today’s economy.

Other opponents charge that the high prices of drugs aren’t examples of price gouging at all, but necessary increases for drug makers to recoup costs of research and development. Yet a Health Affairs study shows otherwise: enough money is made by US drug companies that they could cover research and development and still save “US patients, businesses, and taxpayers approximately $40 billion” per year, if they operated like the rest of the world.

After gaining heat in the news, Martin Shkreli announced that he would be lowering the price of his medication. Valeant, another drug company has also been under fire lately for the pricing of their medicine. Democrats in the House of Representatives have demanded that Valeant release their info about how they price their drugs. This demand could spread to other pharmaceutical cooperation's; forcing all companies to reveal their pricing strategies. (Ramsey) A few months ago, New York became one of 7 states with bills requiring pharmaceutical companies to reveal their prices. The other states are California, Oregon, Massachusetts, North Carolina, and Pennsylvania. However none of the bills have succeeded. If the bills were passed, all pharmaceutical cooperation's would be forced to submit quarterly reports on the changes to their pricing. (Owens). The war to fight against corrupt businesses has only just begun. Over time, the government and private pharmaceutical corporations will better cooperate and work together to have logical pricing in medicine based on funding and production

How do factors, such as research and development, contribute to the high cost of medication?

The government can only control so much unfortunately this is a touchy subject amongst politicians. There are two ways that the government is currently regulating the prescription drug market, 1. Price controls, usually in the form of required discounts off the average price paid by other purchasers.2. Negotiated pricing, in which the government wields its market power to bargain for favorable rates from pharmaceutical suppliers” (Drug Price Control: How Some Government Programs Do It, 2016 para 2). There are a couple different programs that also benefit consumers if they are eligible such as Medicaid, The Veterans Health Administration (VA) and the Department of Defense (DOD),

A lot of people, particularly the patients who need them, are beginning to wonder why American drug prices are so high. It makes sense why the pharmaceutical companies are selling at the prices they do: they are a business; and they want to, above all else, make a profit. But the real question is: what are all of the

Over the past decade, pharmaceutical companies have spent a total of $2.3 billion in order to influence lawmakers in the U.S. Congress. This has proven to be a fruitful expenditure considering the fact that the five largest pharmaceutical companies have an evaluation of over $1.04 trillion. One of the first successful moves big pharmaceutical lobby groups was the passing of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The “non-interference” clause in this act prohibits the ability of the Secretary of the U.S. Department of Health and Human Services to negotiate the prices of prescription drugs with pharmaceutical companies. By doing so, the pharmaceutical companies are allowed to price freely and optimally. However,

The cost of new medical drugs seems to be accepted by many people who use them. These pharmaceutical companies increase their profits more and more each year because many people assume that it does cost a lot of money for research and development. Where in reality, they are only spending about 15% of their profit margins on research and development alone. A huge percentage of these drugs are actually tested in other countries where people are more willing to do trials with these drugs because they cannot afford them. Not only are there more people who are more willing to try them, but also there is less regulation and oversight when it comes to testing. Conducting these clinical trials overseas not only saves

Drug prices are set by pharmaceutical companies to cover research and development costs. While R&D costs clearly need to be covered, markets in developed countries already pay for most R&D of new products. Because of this, it makes moral and economical sense to establish a two-tiered pricing system; for R&D costs to be paid for by developed countries, allowing significantly reduced prices to be charged in developing countries.