Have you ever wondered that why these cancer drugs are so expensive? A breast Cancer drug named Kadcyla has been recently developed which may cost $90,000 per patient per year. We usually assume that the anti-bodies or other elements which have been used to manufacture these drugs are really expensive; in short we assume that manufacturing cost of these drugs is really high.However, in reality this does not happen at all and it is a small part of trick being played by the management of these companies.
These drugs are discovered after lots of research and development done in their labs and hence a huge amount of costs or overheads are involved in this section. In order to compensate forthese overheads, the prices of such drugs are inflated. Now, Pharmaceutical companies can usually charge such amount over the span of 20 years because this is the usual tenure of their patent and then after this period is over, any other company can copy the compound and deliver the same at much cheaper price. In other words, any pharmaceutical company can monopolize the market for the span of 20 years but that’s not it, they try their best to extend this period of monopoly by using some other trick too.
The famous concept of Evergreening is used when a company wants to increase the protection of the patent or the monopoly tenure into the market. The elements used to create that compound (drug) are tweaked a little and thus the new compound, which is just different in terms of nomenclature (but carrying the same properties of the previous compound), is submitted again in the form of a patent. This is the best way to manage their markets when a company has invested a lot in the Research and Development of that drug.
This kind of practice are mostly performed in case of life-saving drugs, reason being that their sale is already infrequent and the high cost of these drugs adds more to it. Hence, monopoly of 20 years is not enough. Please note that in most of the countries like Korea, Canada, Australia and India, this is being opposed but then it is difficult to take a stringent against it because anything this may discourage these companies to innovate. They use such methods to maximize their profits and this is the same reason due to which they innovate.
Managing the medical markets is not conventional as compared to other industries because here you are dealing with the lives of people and thus any selfish step taken by the management would rip off the reputation of the market which can be followed by lots of CSR (Corporate Social Responsibilities) activities. Hence, this concept can be used but it is best if it is not being used on life-saving drugs.
