Why do We Need Differential Pricing?/Industry Perspective

author: Mark B. McClellan, Brookings Institution
author: Judy C. Lewent, Koch Institute, Massachusetts Institute of Technology, MIT
published: March 20, 2013,   recorded: August 2004,   views: 2714

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Why do We Need Differential Pricing?/Industry Perspective The very first tablet or drop of a new medicine comes at a dear price-- $800 million – according to recent studies of R&D in pharmaceutical industries. But manufacturing subsequent pills costs literally pennies. What’s a fair way to price life-improving, or life-saving medicine? The two speakers in this part of the forum vigorously defend charging different prices for medicines in different parts of the world. Judy Lewent argues that differential pricing ensures global access. She says, “There would be little sense selling drugs at prices people can’t afford.” It also generates the revenues necessary to generate new cures. “When we price for access, it’s a reflection of our belief in the power of free markets to advance the social good. We can meet the world’s health needs and also make a profit and continue to prevent, treat and cure disease.” Mark McClellan sees on the horizon a new order of drug treatments, such as tailoring molecules to the needs of an individual patient. But, he says, we won’t reap the benefits of these potential cures if current trends continue: nations that band together to lower drug costs for their citizens, and the reimportation of brand name innovator drug products. McClellan says if we don’t “provide financial rewards that reflect the value of innovation, we may not continue to get improvements that biotech makes possible.” Both speakers endorse more affordable medicines, but through insurance coverage rather than price controls.

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