Drug Revenue and Affordability

In CPhI’s 2017 Annual Report, Girish Malhorta, CPhI expert and president of EPCOT International, took a look at revenues of pharmaceuticals around the world to get a perspective on how drug companies may be able to reduce the cost and availability of the drugs they manufacture. Malhorta believes that making drugs more affordable can improve sales in developing countries, stating “economies of scale and better manufacturing technologies can make drugs affordable and increase sales.” He also stated, however, that companies need to review and change their business models.

Affordability is important to revenue, according to Malhorta. He stated, however, that it is important that drug companies take into consideration that consumers in some developing countries might not be able to afford the drugs available to them; therefore, current available sales numbers may not be accurate. In order to obtain an accurate view of drug costs versus sales worldwide, Malhorta believes one must compare drug expenditure spending per person, per day in each market-developed countries and developing countries. Companies may then be able to develop global sales plans and improve the affordability of drugs in each market.

“In my travels and personal experiences, I have seen that prices for the prescription and generics in developing countries is significantly lower than the prices for the same prescriptions in developed countries. However, even with low prices, people in developing countries have to decide between food for the family and drugs for the ill family member/s, as a result of low incomes,” he stated in the report.

Ways that drug companies can increase sales while improving affordability, according to Malhorta, include increasing prices, reducing costs, improving processes, and controlling the supply chain. He warned, however, that simply increasing prices may lead to negative publicity and/or lawsuits.

Lowering costs may be a better option, according to Malhorta. These costs can range from things companies can control-manufacturing costs and streamlining processes-to things industry and regulators can control, such as FDA application review times and costs. Malhorta recommended that companies take a look at things like asset utilization as well as having better command of processes to produce high quality products, which reduces waste.

Malhorta emphasized that companies should keep drug affordability in mind when developing and changing business models. “Making drugs affordable is the best long-term way to improve the total sales in the developing countries,” he stated.

Source: CPhI Annual Report 2017