International pharmaceutical market: Priced out

Cancer drugs cost more in America than elsewhere, but that may be just

economist _ MANY Americans think they pay over the odds for drugs—particularly for cancer drugs. Some go so far as to suggest that other countries free-ride on their largesse, and that Americans are thus subsidising drug development, a situation which, they say, needs to be fixed by changing trade agreements.

A study unveiled at the American Society of Clinical Oncology’s meeting in Chicago this week looked into the matter. Daniel Goldstein of the Rabin Medical Centre, in Israel, and his colleagues examined the prices of 15 generic and eight patented cancer drugs in six countries (America, Australia, Britain, China, India and South Africa). They found that the highest prices were, indeed, paid by Americans. The median monthly retail price in the United States was $8,694 for patented drugs like Avastin, Gleevec and Herceptin, and $654 for generic drugs like docetaxel and paclitaxel. Of the countries looked at, India paid the least for its patented drugs ($1,515 a month), and South Africa the least for generics (a tiddly $120).

The story, though, does not end there. Dr Goldstein went on to look at how the prices of these drugs measured up in terms of affordability. To express this he calculated the monthly price as a percentage of gross domestic product per person at purchasing-power parity (GDPcapPPP).

On this measure (see chart), America did middlingly well. India and China were the least able to afford cancer medications. Generic drugs were least affordable in China, where they cost 48% of GDPcapPPP, and patented drugs were least affordable in India, where they were 313%. Americans, by contrast, paid 192% of GDPcapPPP for their patented drugs and a titchy 14% for generics. But Australia, Britain and South Africa all did as well or better than that.

The morals of this story seem twofold. First, just because drugs are cheaper elsewhere does not mean that people who live there can afford to pay for them, let alone pay more than they already do. Were prices higher in China and India, sales might well be lower. Drug companies know that, and set their prices accordingly. Second, it helps to have national purchasing arrangements, as Australia, Britain and South Africa all do. If Americans truly want lower drug prices, they should stop grumbling and become better negotiators, not blame those foreigners who are.

From the print edition: Science and technology


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