You might have found yourself wondering why different prices are charged in different countries for what are essentially the same drugs used to treat the same conditions. It is entirely possible that you have seen the anger online that is inevitable when people discover that their prescription drugs would cost them less, or more if they lived in another country. This comes together with plenty of resentment of the big drug companies with people dependent on certain prescriptions feeling like their health is being held to ransom by the big drug companies.
There are some very good reasons for these fluctuations in prices, which can also sometimes vary across classes of the consumer within the same country as well. In today’s economic climate, some of the arguments for such pricing strategies are considered to be very important in terms of the population of the world and their future health.
Financial access
To put it bluntly, one of the biggest reasons that any pharmaceutical product pricing strategy should be specific to different countries is financial access. Those countries with the lowest incomes simply cannot afford to pay the same prices as those who have a higher level of incomes. By selling at a lower price in these countries, necessary prescription drugs are more readily available, and the people who need than have much better financial access to what can often be life-extending drugs.
Manufacturing costs
While certain prescription drugs are manufactured by just the one manufacturer, for ease of distribution and labeling amongst other considerations they are not always manufactured in the same country. This means that manufacturing costs of the same drug will vary from one country to another. The cost of the ingredients may also vary from country to country. This can of ultimately have a huge impact on the manufacturing cost of the drugs and therefore the price for which they are sold.
It is worth noting that the buying power of the pharmacies in different countries may have an effect on the price. More affluent countries will be able to buy in larger amounts of their prescription drugs in order to fulfill patient’s prescriptions, while in poorer countries the pharmacies will be unable to do this. In the case of life-extending drugs, this may present a very real issue with being able to get the drugs to the patients in a timely manner.
Economics
There is a basic economic theory that governs this; A seller can engage in price discrimination only in the event of three conditions is met:
- The seller must have monopoly power in the production of the product in question
- A range of buyers are happy to pay different prices for that same product
- Buyers of the product are not able to trade product they have already bought amongst themselves
These conditions are met by prescription drugs, meaning that pharmaceutical companies can and should charge different prices for the same prescription drugs in different countries for, amongst other reasons, the reasons mentioned above; namely financial access and manufacturing costs.
Of course, the issues of pharmaceutical costing, especially company specific pricing, is a complex one and should be looked into carefully as there is plenty that a company needs to know. If you would like to know more about this then it is worth finding a Health Economics online course to sign up to. This will give you a greater understanding of the complexities involved and why they matter.