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How easy is Drug Price Capping in United States?

Updated on June 13, 2015

Introduction

In today’s economy, the cost of prescription drugs especially branded products is unquestionably expensive. Manufacturers spent lots of money in getting a single drug product through approval process. When a drug maker obtains a patent on a single drug product, it gives the manufacturer exclusive right to market the product. However, it is difficult to conceive marketing such drug product at a cost lower than the price the manufacturer would like to set. A recent report in The Motley Fool commented on how a country like India, with more population than US, is attempting to “Price cap” the drugs manufactured in India. Here, I intend to review few current drug pricing and whether United States drug makers will have easy transition in indulging in drug price capping.

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Drug Price Control

First, we must understand what drug price capping actually entails and how it may or may not affect future drug manufacturing. It simply deals with a process for establishing drug prices to meet the demand of the consumers. In a society where there is high medical and prescription needs in addition to poor economic status, drug price capping is notably the “raw” approach to deal with such society. The case of Indian government attempting to price cap manufactured drugs is a classic example.

Manufacturers and Pricing

A thorough review of United States drug manufacturing system may reveal some level of difficulty in attempting such price control. By spending lots of money protecting patents years after years, the manufacturers would have issues in attempting to price cap their drugs especially branded products. In order words, their drugs will cost more due to expenses spent on patent protection. Take for instance, Copaxone, a drug used to treat multiple sclerosis runs about $4600 for one month therapy. I am not sure how price capping will work in this scenario. On the other hand, lets look at diabetes medication. The price of Lantus injection vial was raised last year by Sanofi, the drug maker, and at least one vial of Lantus is estimated to cost $166.40 at wholesale price. The price of solostar version of Lantus was also increased last year. I am having difficulty seeing the possibility of drug price capping in the United States. I believe the issue really lies on the support provided by insurance companies because a tremendous amount of coverage is provided by these companies.

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Health Insurance and Generic Drugs

Due to the healthcare system set up in United States, it is difficult to compare it with other nations that do not heavily rely on health insurance companies. Even when you review generic drugs to see if price capping is actually possible, you still find out that money invested in drug manufacturing still may hinder such effort. When there are multiple drug manufacturers producing generic form of same drug, one begin to conceive competition. In this scenario, a stronger drug maker producing many other profitable drugs may be in a position to indulge in drug price capping. Take for instance, a drug like lisinopril, for blood pressure, probably may be on the list for price capping. However, profit making could deter such effort.

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Conclusion

By passing the law on Affordable Care Act, the whole capturing of drug price capping has been altered. We now may have issues in seeing the drug price control for the previously uninsured citizens. Every legal person in the US is required to have health insurance. With health insurance, most people can now get better health care and are able to obtain even expensive medications like HIV drugs and other branded drug products like Copaxone and Solvadi. Some insurance companies may have issues in covering some expensive drugs. This problem often causes manufacturers to collide with Congress due to pricing of their drugs. Therefore, drug price capping may cause financial problems for drug makers in the US and possibly lead to either merging with other manufacturers or downfall of the company.

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