Last week, the Wall Street Journal published an interesting article about why sometimes drug prices are too low.

The piece details the technical reasons that drugs may be
too cheap due to reimbursement systems and fee structures, but I’m more
interested in fundamental issues that would exist regardless of perverse payment
structures.

The first is a weird paradox. For medicines like antibiotics
we think them so important that we demand they be cheap. After all, the under-insured
should not see their kid die from a bacterial infection that was first cured
more than six decades ago.  So it’s
important that all antibiotics are affordable. Amoxicillin, azithromycin,
ciprofloxacin and doxycycline cost a few dollars and treat a wide array of
nasty infections.  We just assume they
will be available and cheap whenever we want them and that they will work as
expected. This leads to the second issue. Western manufacturers make little
profit, if any, from making most antibiotics because of low prices. As a result
they either do not make the products at all, or outsource production to companies
in emerging countries with the lowest costs, notably China and India.

But as I and others have documented extensively, quality
concerns are rampant in these locations.  Typically cheap medicines are formulated in
India, often with slipshod production, with Chinese ingredients, often made in
even worse conditions. The products are sold under a myriad of banners (some
western, some Asian), which do not always work. When the antibiotics don’t
function as expected they endanger the receiving patient and can drive population
level resistance to even properly made versions. Ironically, the savings on
“cheaper” antibiotics results in patients using more expensive products,
sometimes with more side effects.

As policymakers contemplate drug pricing, they should
appreciate that while many drugs are hugely overpriced, some are too cheap. We endanger
current patients and future generations by ignoring this fact.

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