Global reports track various indicators of economic health; one of them undertakes an assessment of the cost for people to obtain medically necessary, often life-saving prescription drugs. Over time and across countries, such reports consistently show one thing: There is no consistency when it comes to pricing.

In particular, patients in countries that are emerging from the bottom of the pyramid pay more than nearly anyone else. Compared with the poorest global citizens and the wealthiest, it is these consumers somewhere in the middle, though still at great risk of being unable to support themselves and their families, who get stuck with the highest prices.

This outcome is a result of several forces. In particular, in developing nations, the pharmaceutical industry is often a monopoly. Stringent bureaucratic requirements and extensive licensing demands, as well as underdeveloped logistics capabilities, make it very difficult to establish distribution operations in many countries. The few providers that have managed to overcome these hurdles thus feel free to price the drugs they import at nearly any level they choose. Desperate patients will likely pay far more than they can realistically afford to obtain the medication, and there is no competition to offer cheaper options. In the Philippines for example, only one company has the rights to sell antiparasitic compounds. As a result of such monopoly markets, a chemotherapy treatment that costs an estimated $200 per year to produce costs patients $8000 in Brazil and a whopping $30,000 annually in South Africa.

In contrast, in the very poorest countries in the world, even if the pharmaceutical industry structure is similarly a monopoly, international aid organizations work to establish safe and reliable channels for medical supplies. For example, nongovernmental organizations such as UNICEF and the Global Fund to Fight AIDS, Tuberculosis, and Malaria embrace their self-imposed mandates to obtain and then distribute medications that can halt the spread (or even eliminate) preventable diseases. However, once a country achieves a certain minimal level of development, many of these organizations seek to turn their attention and devote more of their resources to other areas that remain in dire conditions. But their situation is still precarious, so the removal of this global source of support can have terrible consequences for individual patients.

Another contributing factor pertains directly to marketing and the value created by branding. Consumers who are less familiar with generic drugs and the rules surrounding them, as well as less able to access in-depth information, tend to demand branded versions. The well-known name brand offers at least some guarantee of quality for a product that they cannot judge in advance. Therefore, whereas in more developed markets, branded prescriptions must compete against lower priced generic alternatives, such competition and its price-lowering effects does not exist, by and large, in less developed countries.

These reports rely on extensive investigative efforts; currently, neither countries nor pharmaceutical firms are required to disclose the prices charged. Thus consumers have no way of knowing whether the prices they are paying are more or less than what people in a different nation might be spending. Publicly available records thus might be helpful in resolving the public health crisis, but naturally, pharmaceutical firms would prefer to keep such information private.

Discussion Questions

  1. Should pharmaceutical firms be allowed to keep their pricing policies private, as long as markets will bear the varying prices charged?
  2. What are some other options for regulating the prices of life-saving medications? Or are regulations even needed?

Source: Joanne Lu, “Drug Prices Can Take a Surprising Turn When a Poor Country Gets Richer,” NPR, July 8, 2019