How are drug prices set?
After the scandal over the massive cost of EpiPens in the US this summer, we ask how the prices of drugs and medical devices in the UK are set, and whether or not they’re fair.
Anyone with an allergy will be familiar with the EpiPen – a syringe prefilled with the hormone epinephrine to treat severe reactions to allergens such as nuts, cat hair or insect bites. People who need one usually have several so that they always have one to hand. The syringes expire after a year.
In the US in 1997, a two-pack of EpiPens cost $97 but by the summer of 2016, this price had rocketed to $608. The company that makes them faced a barrage of criticism and has since changed its pricing. But the question is, how did they arrive at that sum in the first place? And how does any pharmaceutical company set the price of a drug or medical device?
How much do drugs and devices cost in the UK?
While the cost of UK prescriptions is set (currently at £8.40 for one item), the actual cost of those medicines to the NHS can vary. From a seven-day course of amoxicillin antibiotics that costs £1.68 to Eculizumab (also known as Soliris), which at £10 million per patient is the most expensive treatment ever available on the NHS, the prices of medicines in the UK can vary widely.
The price gap between various medical devices is similarly vast – from the cheapest salbutamol aerosol inhaler to treat asthma symptoms and asthma attacks that come in at around £1.50 each, to a made-to-measure prosthetic limb with the latest robot technology that racks up a bill of thousands.
How are prices set?
Products classified as pharmaceuticals in the UK (and that includes medicines and medical devices, of course) are subject to the Department of Health’s Pharmaceutical Price Regulatory Scheme (PPRS). The details of the scheme are inevitably complex, but essentially it’s a voluntary agreement between the government and the pharmaceutical industry to reach a balance between pricing things too highly, while still making enough money to reinvest in the business.
On average, it takes around 12 years and more than £15 million to develop a drug, so a pharmaceutical company needs cash to support research and development (R&D), labour costs, energy costs, raw materials and marketing to ensure that health professionals are aware of the new drug and how to use it.
So although it may seem as though profit margins are enormous, this is a crucial link in the chain to allow exciting new drugs and medical devices to be developed, adapted for different uses and licensed for treating different conditions.
Do you fancy being part of it?
If you want to be involved in bringing a new medicine or medical device to the market, then your options couldn’t be more varied. Globally, the pharmaceutical industry invests more in R&D than any other industry – £11.5 million every day. And in the UK, the pharmaceutical industry employs around 23,000 people in R&D. So that’s one exciting career option.
Another is in regulatory affairs. Yet another is in pharmaceutical marketing. Or perhaps a job in pharmaceutical sales as a drug rep could be more up your street? You too could be a piece of the “drug price” jigsaw…