Pharmaceutical companies have an unusual ability to perform a relatively unregulated activity and push up drug prices beyond inflation. This allows pharmaceutical companies to continuously increase their revenues, even if the demand for one or more drugs is not high. The result is a major overrun of demand. The growth rate of prescription drug revenues was three times more than the increase in prescriptions for these drugs. Much attention has been paid to new drugs marketed at very high prices.
Greater attention has also been paid to drugs that have already been released under a new owner and have seen a sharp rise in prices. Pharmaceutical companies do it, of course, to generate income. However, most of the company’s revenue comes from a steady upward trend in drug prices on the market for some time. The number of drugs that pharmaceutical companies have in their tubes will also affect the price of each drug.
How the medicines are priced by the Pharmaceutical Companies?
The primary goal of pharmaceutical companies in determining the price of drugs is to generate the most revenue. Pharmaceutical companies normally have low and balanced drug prices, with the possibility of applying price increases at fixed intervals. Pharmaceutical companies are worried about various factors when determining the price of drugs.
Consider the uniqueness of the drug, i.e. how many other drugs are already available to treat the same problem. If the market is saturated with the drugs to treat a particular condition, new drugs price for the same condition will likely be lower. Competition is another factor that affects prices. Pharmaceutical companies need to consider the popularity and success of drug competition and whether new drugs offer additional benefits over competing medicines. Additional benefits lead to higher prices.
What is the pricing problem?
Determining the wrong price for the drug is one of the biggest mistakes of a pharmaceutical company. The price of the drug, too low or too high, has a significant impact on its ability to succeed. For example, if the price of the drug is too high, payers may not be willing to pay for it or doctors may not want to prescribe it. They may think that the drug is not worth the price if it is likely to offer very little benefit to guarantee the cost.
On the other hand, if the price of the drug is very low, doctors may conclude that it offers a less effective form of treatment than the existing drug. Negotiations of prescription drug price is often conducted secretly, leaving the patients and doctors out of the bargaining room despite the impact of drug prices on the health and treatment of patients. To improve prescription drug transparency, it is important to target some key market persons who are capable of impacting the prices of drugs.
Pharmaceutical companies produce and sell drugs, but they do not explain prices or costs that may exceed research and development. Some even buy existing drugs, spend nothing on research and development, and continue to raise prices.