Patents – the root cause of price inflation

© Money Sharma/Keystone
Thanks to the patents system, pharmaceuticals companies benefit from a monopoly situation and exclusive commercial rights. They also benefit from a gross lack of transparency: they are not obliged to disclose the real costs of research and development (R&D) required to develop the product. Pharmas can therefore fix the prices as they wish and maximise the profits, to the detriment of patients.

The price is crucial for poor countries whose budgets for health are limited, and where the frequent absence of a health insurance system obliges patients to pay for the drugs out of their own pocket. This situation is also an important factor in rich countries, as it can result in decisions on rationing and endanger the continuation of universal health cover.

Pharmaceuticals companies justify the high price of their patented products by the necessity to amortise their research and development (R&D) costs. However, their pricing strategy is opaque, and published estimations of the average cost of developing a drug are shrouded in controversy. Even where the prices can vary significantly from one country to another, they use as a reference the fixed price (not monitored) for the United States market.

Protected from competition during the period of validity of their patents, the pharmaceutical multinationals impose their “global prices” everywhere in the world. Their business model is based upon very lucrative key products, much prized by investors. And for good reason: the annual turnover of these “blockbusters” exceeds a billion dollars.