E-drug: Feeding the beast? (cont'd)
---------------------------------------------
On the one hand I do not like Richard's response to Jody because it is
too simple and too much like blaming the victim. Political will is not a
simple thing that you can turn on like a tap!
On the other hand there is a lot of truth in what Richard has written
and he has focused in on what is probably the key leverage point.
What I was trying to indicate earlier is that companies will set prices
as high as they can get away with that will maximise the bottom line.
ie as high as the market will bear.
If the market consists of many buyers and there is a gap between the
rich and the poor then companies will "skim the market" and set high
prices that are too high for the poor so they can take more money
from the rich.
This is not because companies are "beasts" but because of market
failure. The problem is a system problem. If companies are rewarded
for maximising the bottom line regardless of health care outcomes
what should we expect.
Given that the market for drugs is so far from the "pure competition
model" if buyers want lower prices they must set up some type of
bulk purchasing or bulk subsidy scheme to increase their market
power such as the Australian PBS or NZ Pharmac.
A comparison of Australia and New Zealand provides evidence to
support Richard's point. New Zealand is smaller and so has less
bargaining power and so should expect higher prices. In the past it
has had much higher prices. However in recent years there has been
quite strong bipartisan political support for lower prices. This is
possible in New Zealand to an extent that would be difficult in
Australia because there is little drug manufacturing in New Zealand so
the companies have less influence over the politicians than in
Australia. As I understand it the prices in New Zealand relative to
Australian prices have fallen in recent years. Many companies have
dramatically reduced their expenditure on promotion in New Zealand
but not in Australia. (Not only can promotion cause high prices but
low prices can cause less promotion. Lower prices and less misleading
promotion are both likely to improve health care outcomes.)
The reform that I would like to see is the development of systems for
rewarding companies according to their contributions to health care
outcomes.
Regards,
Peter
Dr Peter Mansfield
GP
Director, MaLAM (Medical Lobby for Appropriate Marketing)
peter.mansfield@flinders.edu.au
www.camtech.net.au/malam
PO Box 172 Daw Pk SA 5041 Australia
ph/fax +61 8 8374 2245
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