Drug price distortions

In recent times, the high prices of prescription drugs in the U.S. have contrary to the welfare policy for its elderly citizens who are the intended beneficiaries of the state run public healthcare programs. And with the rising number of US citizens sourcing their personal drug needs from low cost overseas market, the issue of disparity between the drug prices in the U.S. and other countries is gaining potency.

The Americans pay the highest prices in the world for prescription drugs. Patent regulations by FDA means that the consumers pay an exorbitant price for their prescription drugs, than they would if they use its generic counterparts.

The US spends more money on healthcare than any other country in the world. Still 44 mn of its population is denied healthcare insurance. The U.S. healthcare industry is one in which top companies rake in huge profits, spending encor amounts on marketing and advertising. For example, Pfizer's M&A budget is half of its expenses but R&D budget is just a quarter of it.

The WHO has been advocating the concept of 'Differetial Pricing' for quite some time. It advocates that essential drug prices should in some way reflect countries' ability to pay as measured by their level of income. The concept of differential pricing can thus, also provide a mechanism to ensure not only the affordability of a patented drug in a developing country but also advocate incentives for innovation.