Pharmaceutical companies, I feel, make too much money. Making money is not a problem, but to do it under the guise of a 'noble' profession or creating artificial non tariff barriers is definitely not right. Bayer has some cancer drug and Cipla has introduced a copy cat version at 10% of the price. Read the article in Economic times.
http://economictimes.indiatimes.com/news/news-by-industry/healthcare/biotech/pharmaceuticals/Cipla-makes-cancer-drug-cheaper/articleshow/5776074.cms
Point one - To invent a radically new drug there are high R&D costs. Every drug maker needs to have a business advantage for some period of time so that it can recover the cost of this R&D. This is what the patents do. In this period pharmaceutical companies price medicines more than 100 times the material (and variable) cost as they have to recover the sunk costs (R&D). The debate is on the length of this free run time. With pharmaceutical companies having profitability significantly higher than the average corporate rate, it is obvious that the free run period is a bit longer than what it should be.
Point two - Cipla says that they are introducing the new drug for Indian patients. I doubt this. They are doing it to make money. Like I said before, the material cost in such cases is less than 1% of the sale price. Since Cipla has not done the basic R&D for the product they would be making a huge profit on the drug. They do not have any other major fixed cost to recover. If they were really interested in 'serving' the Indian patients, they could have offered it at a 10% or 50% margin over the material cost. This they will surely not do.
http://economictimes.indiatimes.com/news/news-by-industry/healthcare/biotech/pharmaceuticals/Cipla-makes-cancer-drug-cheaper/articleshow/5776074.cms
Point one - To invent a radically new drug there are high R&D costs. Every drug maker needs to have a business advantage for some period of time so that it can recover the cost of this R&D. This is what the patents do. In this period pharmaceutical companies price medicines more than 100 times the material (and variable) cost as they have to recover the sunk costs (R&D). The debate is on the length of this free run time. With pharmaceutical companies having profitability significantly higher than the average corporate rate, it is obvious that the free run period is a bit longer than what it should be.
Point two - Cipla says that they are introducing the new drug for Indian patients. I doubt this. They are doing it to make money. Like I said before, the material cost in such cases is less than 1% of the sale price. Since Cipla has not done the basic R&D for the product they would be making a huge profit on the drug. They do not have any other major fixed cost to recover. If they were really interested in 'serving' the Indian patients, they could have offered it at a 10% or 50% margin over the material cost. This they will surely not do.
2 comments:
I agree with you almost everywhere. But there are two faces of the coin. India has to respect patents, and yet at times it has to go for public welfare sacrificing patent rights. In this case, it remains to be seen if the new drug is as effective as the original one.
Well put. Though it's also true, like they say, 'Price of a product is the highest cost that the market can bear' so one can't blame the companies either or constrain them into subsidizing the drug, which will eventually harm the consumer. At the same time, pharma companies in particular have to gain the trust of consumers, hence the high talk one reckons.
Post a Comment