Innovations in the pharmaceutical market make it possible to treat and prevent many diseases.
Pharmaceutical innovations entail certain mandatory costs that must be utilised in research and
development. The right to equal access to medicines is a social value. The cost of medicines and
global spending on medicines can make it difficult to achieve this social value. Increasing demand
for medicines and rising medicine prices create a major challenge for the health system.
Increases in medicine prices can also cause health system problems by displacing investments in
other necessary care services for patients.
In particular, the use of a single drug in the treatment of some diseases can potentially lead to the
pharmaceutical manufacturer retaining market power. Patented medicines may have high prices
because they have no suitable alternatives and face no competition. At the same time, medicine
prices can vary considerably between different countries. Differentiating final prices by country
prevents everyone from demanding the lowest available price.
In addition, expected increases in medicine prices may lead to stockpiling. Stockpiling of
medicines by companies and some distribution organisations may lead to patients not being able
to find the medicines they are looking for and their treatment may be disrupted.
When a new pharmaceutical product is discovered, a patent incentivises the manufacturer's
investment in research. Patents can help establish a fair balance in the pharmaceutical market,
but monopolisation that occurs until the patent expires can lead to high prices for the
manufacturer. In short, the manufacturer of an original medicine can significantly increase prices
when it is not facing competition and the treatment is necessary. This may continue until a
competitor enters the market.
Factors Affecting the Increase in Pharmaceutical Prices
Manufacturer control over the price of a medicine can be indirect or direct. When setting medicine
prices directly, pharmaceutical companies focus on several different factors. These are
- The uniqueness of the medicine
- Competition situation
- Efficacy of the medicine
- Research and development costs
If the producer cannot determine the price directly, a bargaining takes place between the
producer and the regulator. The price is determined as a result of the negotiations. In some
countries, such as Germany and Denmark, medicine prices can be set freely. In these countries,
some additional measures are used to control pharmaceutical expenditures. Price reductions and
price freezes are examples of these additional measures. In some countries, such as Italy and
Greece, the prices of medicines are set according to certain criteria.
An increase in the price of medicines leads to competition, which serves to drive down prices.
The same pricing has a major impact on the potential for success. For example, a high price may
make payers reluctant to pay for a medicine. Similarly, doctors may be reluctant to prescribe a
drug with a very high price but little effect.
The introduction of a generic, i.e. equivalent, medicine may lead to a decrease in prices. A
generic medicine is a copy of a medicine whose patent protection has expired, produced with the
same active ingredient. Generic medicines have an extremely important role in lowering prices.
This reduction enables patients to access affordable medicines and saves money on healthcare
services provided by public institutions. In summary, the introduction of a generic medicine to the
market puts pressure on the original medicine.
Approaches to Price Competition in the Pharmaceutical
Industry in Different Countries
Direct price controls may be provided by the regulator to ensure price competition in the
pharmaceutical sector. The prices set may vary depending on the conditions of the countries.
Examples include countries such as Spain and France. It should be kept in mind that excessively
low drug prices may also lead to an increase in consumption. Moreover, direct intervention of the
authority may cause R&D activities, which are of vital importance for pharmaceutical
manufacturers, to lose their quality, new medicines may not be produced and, as a consequence,
the generic market may not develop. Therefore, the medicine pricing policy determined by the
unilateral authority may not always have the expected effect.
In order to prevent high increases in medicine prices, some countries, such as the UK, Portugal
and France, require that cost and efficacy analyses of the medicine be submitted to the price-
setting authorities.
Another approach to indirect price control is profit control. This method, used in some countries
such as Turkey, the UK and Korea, involves controlling the profit level of the manufacturer or
product that produces the medicine. Increases in pharmaceutical prices also have significant
effects on Turkey's position in the sector. Especially for imported medicines, price increases
affect costs.
In order to increase the applicability of equitable health policies and to encourage innovation, the
health sector requires policies that ensure that price competition is as fair as possible. In this
sense, decisions can be taken to prevent unfair pricing and remove barriers to access. Policies
that provide price controls, while enabling access to health and essential medicines, bring other
problems. As a result, there is a need for price competition in the pharmaceutical sector, as in
every sector. You can contact Sina Pharmaceutical Warehouse, which has 25 years of industry
experience and an expert team, to learn more about pharmaceutical exports and the sector.