Globalization opens borders, gives people access to a wider range of products and technologies, and helps price optimization, thanks to healthy competition. But that is ideally. Indeed, the situation in the Global pharmaceutical market is far from being perfect and, probably, it will take years to find better solutions to counterbalance both price and quality issues.
4 Main Challenges of the Global Pharmaceutical Market
- Price challenge
- Quality challenge
- Regulatory challenge
- Access challenge
Can Generic Medications Be a Fix for the Price Challenge?
According to The Economist, “WHO estimates that 100m people fall into poverty annually owing to the prices they pay for medicines.” There are no regulations on how to form drug prices, and it seems as Big Pharma companies that mostly contribute to the development of new drugs calculate their prices based on medial income and financial situations in the first world countries where new drugs are normally implemented first.
So, for new and rare drugs protected with patent legislation, it is difficult to lever pricing downwards. It is also true for the drug for life-threatening conditions. For example, cancer prescription drugs in Australia approx. 2.5 times higher than other drugs. Add to this, evergreening practiced by Big Pharma companies, when they try to extend their patents by all possible means, and you will see that, in the absence of competition, the current global situation works in big corporations’ favor.
However, besides unique and rare brand medicines with valid patents, there is a wide array of medications that already have been being produced by dozens and hundreds of drug manufacturers. Prices on the generic pharmaceutical market may be an order of magnitude lower than those of brand drugs, which seems to make a generic segment of the market to be a great competitor to the overpriced brand medications. But here is a surprise: it does not work well.
Despite low prices and a great number of generic products available, the manufacturers of generic drugs, which are often the companies from third world countries, mostly fail to enter the global competition by the following reasons:
- Unproved quality of medications.
- The high cost of legal procedures mandatory to enter the market.
- Lack of support from governments.
- Poor promotion of generic drugs and poor purchasing.
These points are substantially similar to what we earlier called challenges. Let’s have a look at how they reflect on the market situation.
Unlike many sources, we do not say “poor quality of generic drugs”. We prefer to say “unproved quality” because we believe there are many generic firms producing medications of proper quality that are not dangerous and effective. But along with them, also many drugs are produced by the productions that do not follow GMP (Good Manufacturing Practices), which means they cannot guarantee stable quality and exclude risk factor associated with production and storage.
A lack of unified standards applied worldwide and the difference in country legislations necessitate approval of every medication, every time it enters a new market. That results in great expenses for manufacturers and distributors and makes consumers more suspicious about generic medication. In the end, people with low incomes go and buy more expensive drugs from well-known corporations to avoid quality issues.
Generic manufacturers that sell drugs at low prices are mostly low-margin companies. They do not invest money in development, they do not spend on brand promotion, and they do not have great funds to enter the global market.
Every country has specific regulations on manufacturing, authorization, and distribution of medication. If a manufacturer wants to supply globally, it has to apply for approval of new item in every target country, and it takes much money and time. Many smaller pharmaceutical companies just cannot afford it whilst Big Pharma corporations have enough money and experience to do this routine. As a result, they win on globalization, but small businesses fail. Prices remain high and consumers suffer.
Some governments support their people by literally violating International Patent Law. Let’s take India as an example. According to vice.com, the Indian government has granted a license to the company Natco to produce a generic analog of an anti-cancer drug of the German company Bayer, which has resulted in 97% price decrease, global disapproval of Big Pharma companies, and attempts to force India to buy branded medications, instead of producing cheaper generic versions. Meanwhile, the WHO accepts producing generic versions of life-saving medicines.
The policy of the Indian government helps citizens of India and some other poor developing countries importing Indian drugs to get affordable medications, but it cannot change the situation globally, and overall prices are kept to match economical situations in wealthy countries.
This one is closely connected with price and legislation challenges and especially affects people in developing countries that do not have local production. These countries often do not have essential medications for life-threatening conditions and, at the same time, their regulatory procedures and quality control are limited, which leads to longer approval, often crucial for the health of nations.
WHO makes efforts to help the countries with a lack of regulatory base with collaborative procedures, when those countries have a choice of products pre-qualified by WHO or SRA that are recommended for accelerated registration. This helps patients to get medications quicker.
Improved procedures help with legal issues but have nothing to do with pricing. Although WHO tries to prompt global corporations to reduce prices for the markets with a weak economy and low incomes, they mostly are not willing to do so warring that it will be difficult to keep prices high in the Western countries.
One more reason why global prices for medications are growing but not reducing is unskillful or corrupted procurement. Not many countries have centralized supply of medications and negotiate prices with pharmaceutical companies. Canada is an example of successful price policy that aims price reducing, as it has a health care system funded by the government.
On the contrary, the USA government cannot control drug prices, and drug manufactures contract directly with different health providers and bargain the prices confidently. Furthermore, the interests of large U.S. corporations often interrelated with the country’s economy, and the same is true for the UK, Germany, or Denmark, which means not every government is interested in reducing prices for medications. In some third world countries, corruption is often involved in purchasing medication.
Are There Any Perspectives on Global Price Reduction?
Currently, the globalization of the pharmaceutical market does not help reduce drug prices. On the contrary, the prices continue growing. According to cbsnews.com, for the first half of 2019, in the U.S., 3,400 drugs are increased in price for 10.5% on average. Generic companies experience difficulties to expand globally by the reasons we explained above, whilst Global corporations enter new markets and increase their sales and profit.