Bringing Manufacturing to the US Will Not Reduce Drug Prices
[Posted on: Thursday, February 02, 2017] What is the main reason for high prices of drugs; is it the extensive regulations, is it long time to develop new drugs, is the cost of manufacturing in the US, or a combination of all, or just that the industry has products whose demand is fixed? The industry has products that we can’t live without, literally, and hence can charge us whatever it can make us pay. For the last few years, high drug prices have been the staple of all political conversations. But there have not been any reasonable proposals. There are already several ways to expedite drug approvals but expedited approval with few regulatory hurdles did not lead to lower prices of the resulting drugs. In some case, FDA bent the rules extremely to make sure the drug got approved despite serious concerns about its efficacy. With expedited pathways and multiple regulatory incentives, the time to market has been cut down remarkably compared to a decade ago. And it led to some great drugs that improved the quality of life and increased life expectancy, but also some of the most expensive drugs. In a meeting with pharma executives this week, President Trump emphasized on the need to increase drug manufacturing in the US to create jobs and reduce drug prices. There obviously will be increase in jobs but would not help reduce price. The cost of manufacturing drugs has steadily declined due to automation and a combination of outsourcing and domestic production. The cost of API is at its lowest thanks to manufacturing in low cost regions of the world, mainly in India and China, while the high-end, high-control, higher-risk, and highly profitable manufacturing of finished products is done domestically increasing the profits of the manufacturers. Cheap generic drugs are predominantly manufactured outside the US, while the expensive innovator drugs are manufactured mostly in the US sites due to intellectual protection concerns and huge profit margins. In free market economy manufacturers make decisions based on their bottom line; government can create an environment to increase competition, but in the end prices are controlled by the market. And if the drug market has taught us anything, the last thing that drug prices depend on is where it is manufactured.
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