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Aubrey Masango 1500 x 1500 2020 Aubrey Masango 1500 x 1500 2020
The Aubrey Masango Show
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The Aubrey Masango Show
20:00 - 00:00
Business Unusual

Drug profits - a necessary evil or something that needs to change

1 July 2020 7:15 PM

Using profit to solve health issues does not work in a pandemic, perhaps at all.

This is a really complex issue. How should we fund the research for more effective drugs to treat conditions that may affect millions, knowing that many will not work and then determine how to price those that do work to cover the costs not just of the drug that did work, but the research for those that did not.

The cost to produce the drug has components that include the search for the potential candidates, the development of the tests on animals and then humans and the ongoing monitoring to determine its effect.

The mechanism to do this has been to have for profit companies get patents for their discoveries and then get a period between 5, 12 and sometimes over 20 years to be able to exclusively supply the drug and set its price.

There is no question that the system can be better. The question is how and despite many attempts by those that have practical alternatives, it does not appear enough has changed to make medicine more accessible.

Could the Covid-19 pandemic provide the public support to overcome the financial resistance that those that benefit from the status quo?

A coronavirus vaccine

This week Gilead Sciences, the maker of Remdesivir, issued a statement about the price they will look to charge should the drug be certified for use to treat Covid-19.

It is good news that a drug has shown some positive signs of being able to treat the virus and allow those infected to recover sooner. Initial trials suggest that it reduces the time recovering in hospital by four days.

When hospitals rapidly fill, having someone well enough to leave sooner is not just good for the patient but for the hospital and other patients too.

One method used to price drugs is to charge what they provide as value. Gilead said that charging the four-day stay at a hospital would be the way they may have priced it, but chose a lower number under the circumstances.

A 5-day course using six shots of the drug will cost R27 000 in developed countries, the original price based on the hospital stay would have been R142 000. It seems like a good deal under those circumstances, but both are still very expensive.

This is quite likely an exception though as pharmaceutical companies when they do get a drug to market look to earn as much as possible for long as possible and this is where the problems begin.

Medicine at any cost

It is a very difficult decision to determine who should get treated when new and very expensive treatments are released. Tim Hartford looked at this issue on hos podcast Cautionary Tales

Worst case scenario

Martin Shkreli shot to prominence when he raised the price of an HIV drug by 5 000%. That he would and could demonstrated the worst case scenario for unregulated pricing of patented drugs. The public outcry did improve the situation with this drug but not the issue.

An alternative way to fund medicines

Priti Krishtel makes a strong case to amend patent laws while protecting innovation.

A lot of medical research begins in academic institutions with theoretical tests and models looking for potential candidate drugs that might address both broad and niche conditions. The effort to set up and manage the trials is typically where those institutions had over to pharmaceutical companies to determine if the drugs are as effective as hoped and buy the license or patent from the institutions.

After the necessary rigorous testing the drug may be sold and ideally generates enough sales to not only cover the cost of the research but also fund further research.

This is particularly difficult for drugs that might be life saving but only affect a few people who may go bankrupt in an attempt to stay alive.

If a better process could be designed where patents are not awarded for long periods and not renewed.

But companies need not carry the full burden for testing but rather have that more actively covered by a global agency like the World Health Organisation.

Similarly governments or government blocs like the AU or G20 may offer an financial incentive to have companies look to develop drugs to treat conditions identified by those groups. As a result of the financial reward the sale cost of the drug is calculated only on the cost to produce it (which in some cases is still high).

Finally, some drug prices should not be regarded as a regular product which allows companies to not compete with some hard to produce drugs allowing any price to be charged. They should be priced globally and adjusted to local areas to keep them both affordable but also to prevent unfair imports.

This is a simplification of the issue and equally a simplification of the solution, but unless the issue is tackled seriously and many more take an interest in addressing it, this pandemic will pass but the unsustained rise in drug costs will lead to as many deaths and possibly even more economic harm to humans who just wanted to stay healthy.

1 July 2020 7:15 PM

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