Saturday, January 12, 2008

Price Control of Biotech Drugs: Potential Impact on the Biopharma Industry

Life saving, less expensive biotech drugs, isn’t a good deal for consumers?

The large public outcry or critics about the biopharmaceutical drugs are very expensive and that the biopharma industry is so greedy in making profits. The prices are so high because of the labour intensive, long term process involved, from the hypothesis that a drug might work to actually getting it through the testing and approval and getting it on the market. It takes a lot of money to do that, and of course the drug companies do make a lot of money, but it’s a win-win situation, where they make a lot of money and we get these fantastic life saving drugs. The advancements that are being made are absolutely astonishing. Do we really want to kill the goose that lays golden eggs by putting in price controls? There has to be some incentives for the investors and the biopharmaceutical companies. Again, although a good idea, the drug companies invest so heavily on bringing a drug to market, ideally the market forces should dominate or decide the price of the drug.

Drug importation is a major obstacle. People buy drugs on the internet, from overseas to get it in low prices. These drugs are sold under the international treaty to price control countries with low prices. They are not supposed to be sent it back to the original countries from where they are innovated. Thus, buying drugs overseas introduces price control into the original country, which is undesirable.

Government should stay away from any issue concerning the price control of drugs. The biopharma industry needs to be innovative, creative, energetic and astonishing. A great deal of excited anticipation is required as to what kind of drugs will be coming up in the future. This is only possible, if the biopharma industry can operate in an environment where they can be profit incentive. Thus, Government control of science or negotiating Government purchase of drugs does not guarantee or encourage creating innovative drugs.

When we talk about price control, we are taking the oxygen out of the system. That might not worth the investment and that might stop breathing. Look around and ask a question, how many countries that have the price control system in place have actually innovated new drugs, and the answer is ‘basically almost none’.

Unlike Unites States, many developed countries like Canada or England or much of the Europe have price control systems for drugs. Let us not overlook the fact that more than 90-95 percent drugs are innovated in U.S. compared to the rest of the world comprising price control countries. The price controls presents a major disincentive to create a new medication.

With the Government’s intervention, if the health insurance companies like Medicare negotiates the drug prices with the biopharma industry? It’s a very bad idea. That would create a monopoly but in reverse. Basically, that would allow the largest purchaser of drugs to negotiate the prices with the sellers. This will force down the price of drugs. Although, initially sounds like a good deal to consumers, ultimately would create disincentives to drug companies to actually invest in innovative drugs.

Some might argue that, the Government agencies like research institutions are actively involved in discovering new molecular entities that are later licensed to biopharma companies. There is a huge difference in investing, marketing and profiting new approved drugs verses the basic research. In contrast, the pharma companies actually create the pharmaceutical product drug. The venture capitalists need to get repaid too for their efforts and contribution, don’t you think so?

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