The cost of healthcare drugs
Good health is essential to having a high quality of life. It is a key ingredient especially in key indicators such as the Happiness Index by the World Health Organisation which looks at Health as one of the measurement for a country’s development.
In Singapore, this would seem like a given due to the efficiency of our healthcare system. From minor ailments to major diseases, there is a system in place for all these processes to be efficiently carried out. Based on a report by Bloomberg, Singapore’s healthcare efficiency is the second best in the world, right behind Hong Kong. This puts us in a good position in terms of our cost as we are able to maximise our productivity.
However, besides looking at the entire system, there are parts or components which are worth to study. In my entry for meritocracy, I would dwell into the cost of drugs in the pharmacy industry. The reason for this is because these drugs are manufactured from places all around the world and are sold are a relatively similar price. This will cut across many different countries which makes it relatable for any country that import these drugs.
Take for example the price of EpiPen. It is a life saving drug that consist of Epinephrine/Adrenaline as the active ingredient, which is often used for severe allergic reaction. Now you must be wondering, for a life saving drug like EpiPen, it has to be within affordable range right? Let’s take a look at the statistics below:
Yes, that is an insane jump in price within such a short span of time. Looking at the price alone, it has increased from US$110 to US$650. That is about a 490% increase in price considering that the cost of production only increased by about 50%.
For the average consumer getting by, it is definitely out of reach for many people. Despite the insane price tag to EpiPen, there have been an introduction of generics, also known as cheaper, non-branded alternatives to EpiPen which costs about US$300. Though it is significantly cheaper, it is still rather costly considering that EpiPen use to cost about US$110.
Besides EpiPen, there are also other life saving drugs that have seen a spike in price over recent years. Looking at Insulin, the price per unit has doubled from 2014 to 2018.
Insulin is a drug used to treat both type I and II diabetes. It is used to control the blood sugar levels in patients who are unable to control their own blood glucose levels. Despite having recombinant insulin around for almost 40 years, the price of insulin has not decreased. Instead, market forces alone are causing the price of insulin to increase as manufacturers are driving up prices. According to a report by NBC, given that there are only three major players producing insulin, these companies are able to command a higher price. As a result, consumers have little options and would lose out.
Despite efforts to control prices, there have been little progress for these specific drugs. Thankfully in Singapore, many of these costly drugs are either subsidised or have cheaper alternatives. These prices are regulated by the Health Science Authority (HSA) and they provide subsidies for patients with these conditions.
In terms of cost, it is relatively well controlled here due to proper administration and control of the drugs that are coming into Singapore. Moreover, there are measure in place by the Ministry of Health to provide a recommended amount that hospitals should charge patients.
In contrast to countries such as US, despite having insurance coverage, more than often, the prices of drugs and healthcare services are not standardised across the board. Coupled together with the fact that the average consumer little purchasing power when it comes to health, where the individual would want to go for the best healthcare service, it would cause prices of health products and services to increase.
With reference to the diagram above, the breakdown of healthcare is not as simple as it seems. Altogether, the people involved are the patient, drugmaker, wholesaler, pharmacy, manager and insurance company. All these individuals work hand in hand in order to come out with the price of the specific drug for treatment. As for the case for insulin and EpiPen, despite having insurance coverage, these prices have been predetermined by market forces which aims to maximise profits for these private entities. As a result, it becomes rather hard for the patient to be able to bargain or request for a lower price due to the lack of purchasing power within this equation here.
Despite the high cost, one can argue that it is important to charge a high price in order to attract companies to continue to innovate. In some sense, it is necessary to have an attractive profit margin to keep companies competitive considering that it takes at least 10–15 years for a drug to go through the numerous clinical trials to get a new drug into the market.
All in all, healthcare itself a major industry all around the world. As reported by Deloitte, it will be worth around 10 trillion dollars in 2019 and it is set to continue growing. The stage is now in favour of these private companies. However, it is up to the government and regulatory bodies around the world to keep the cost of healthcare affordable for the masses.
This will be my last entry for Healthcare. From next week onwards, I will be exploring more on the environment. Thanks for reading!