Connect with us

Hi, what are you looking for?

HorizonLifeTime.comHorizonLifeTime.com

Editor's Pick

Pharmaceutical Pricing Around the World

Peter Van Doren

Medicine Pharmacy

The Committee on Health, Education, Labor, and Pensions, chaired by Senator Bernie Sanders (I‑VT), held a hearing on Tuesday in which he asked the CEO of Novo Nordisk why its diabetes and weight loss drugs, Ozempic and Wegovy, cost much less in Europe than in the United States. Senator Sanders reflected popular sentiment when he said, “Treat the American people the same way that you treat people all over the world. Stop ripping us off.”

Why do drug prices vary across countries? An article in the Fall issue of Regulation offers some insight from economists.

The knowledge embodied in pharmaceuticals is a global public good. The incentives are for all countries to avoid the fixed costs of drug development and clinical trials and pay only the marginal costs of producing a drug. The demand for health care increases with income and population, so the worst-case possibility is that the richest and largest country—the US—pays all the fixed costs of drug development, and all other countries free ride and pay only the marginal costs.

The authors gathered data on sales revenue and compared the revenue to estimates of marginal cost to calculate each country’s contribution to the fixed costs of drug development. They conclude that a country’s GDP explains 83 percent of the variation in contributions across countries and the effect of income is greater than proportional. A country with a 100 percent higher GDP contributes 129 percent more to pharmaceutical R&D. 

So, the U.S. does contribute disproportionately to drug development costs. The rest of the world’s contribution is not zero but is less than would be predicted by income and population alone.

The authors conclude: “Our findings indicate prospective gains from international cooperation—from formal or informal international agreements among high-income countries. If other wealthy countries agreed to contribute more to the global public good, they, and the world, would benefit.”







    Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.




    Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

    You May Also Like

    Investing

    Collaboratively administrate turnkey channels whereas virtual e-tailers. Objectively seize scalable metrics whereas proactive e-services.

    Investing

    Quickly coordinate e-business applications through revolutionary catalysts for change. Seamlessly underwhelm optimal testing procedures processes.

    Tech News

    Image: Scout Motors The VW-backed company is following in the footsteps of Tesla and Rivian by selling directly to customers without a dealership. Continue...

    Tech News

    UMG and AI company Klay are forming their own foundational Music-generating AI model. | Cath Virginia / The Verge | Photo from Getty Image...