Who Decides on the price of medicines?

Who Decides on the price of medicines?

The Pharmaceutical Price Regulation Scheme (PPRS) is the mechanism used by the UKinfo-icon Department of Health to ensure that the NHS has access to good quality medicines at reasonable prices. It involves a non-contractual agreement between the UKinfo-icon Department of Health and The Association of the British Pharmaceutical Industry (ABPI). The scheme applies to all branded, licensed medicines available on the NHS. The purpose of the scheme is to achieve a balance between reasonable prices for the NHS and a fair return for the pharmaceutical industry. However, what is decided as a “fair return” is left to the pharmaceutical industry to decide.


Pharmaceutical laboratories decide on the price of medicines according to the country’s maximum capacity to pay for access to treatment. The richer the country, the higher the price. In general, authorities who decide on the price of a medicine align themselves with pharmaceutical companies’ requirements. For several years now, the prices of medicines have been steadily rising.

- Sovaldi, used in the treatment of chronic Hepatitis C, costs £34,982.94 per patient
- Keytruda, used in the treatment of Melanoma, will cost over £64,000 per patient.
- Glivec, used in the treatment of Leukaemia, costs £21,000 per year per patient.

How do laboratories justify such prices?

Prices are high because research is very expensive


The cost of Research and Development (R&D) corresponds to costs incurred by the laboratories when they develop innovative and effective treatment. The pharmaceutical industry justifies the extremely high price of treatment by citing these costs. However, they are overestimated and the real amounts are kept confidential. In reality, a large part of medical research is done in the public domain (universities and institutions) and is funded by public money (e.g. grants and tax credits for research). In fact, we at Doctors of the World have previously argued that Gilead did not take "an inventive step" in developing the drug Sovaldi, as the actual breakthrough was previously achieved by researchers at Cardiff University.


Prices are high because the therapeutic benefits are vast

The greater the benefit for the patient, the higher the price. In the case of Sofosbuvir (Sovaldi), manufacturers justify the price by asserting that it prevents cirrhosis and liver transplants which would cost an enormous amount of money. If this rationale were applied in other areas of our lives, the value of an airbag would correspond to the value of a life.


Prices are high because there are considerable production costs

Firms never reveal the real production costs of medicines. Yet this is what is supposed to determine their price and guarantee reasonable margins on sales. In the case of Sofosbuvir, the profit is colossal. A team of researchers in Liverpool estimated a cost-based generic price of sofosbuvir including a 50% profit margin for the producer to be about £64 for a three-month course of treatment. At £34,982.94, the price of Sofosbuvir (Sovaldi) is 500 times more expensive.

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