The retail price on medications depends on the mark-up percentage that each pharmacy establishes. Since the maximum margin exists only for a number of drugs included in the list of vital ones, the distributor has the right to set such a price that seems to be fit for them. There are no laws regulating the price of other health-related products.
Causes for different prices
There can be assumed the following reasons:
- the lot size. There is the so-called quantity rebate, i.e. discounts for a larger volume of purchases. If one pharmacy procures a larger batch of medicine than another, they sell it at a lower price per unit. Accordingly, the manufacturer can charge a lower retail price for this drugstore.
- used procurement channels. The longer the used procurement channel, the more intermediaries it has. Accordingly, the price rises as it moves along the channel. If you buy from the manufacturer or the intermediary located in the supply chain closer to the manufacturer, the price may be lower with all the ensuing consequences.
- price discrimination. This concept includes the phenomenon when the same product is sold to different customers at different prices (forms of price discrimination can be very different). One pharmacy can be located in a prestigious area and orient their prices on the corresponding income of the people living there. Another pharmacy is opened in a poor area with corresponding lower prices.
- much depends on the brand. A drug produced by a well-known manufacturer that has proven itself in the market will cost more. It is known as a fee for “reliability”.
- the price depends on the substance – the active substance, which is part of the drug. Indian or Chinese raw materials, as a rule, are cheaper than a substance produced in Poland or, especially, Great Britain.
- the price of any medicine is very much affected whether it is branded or generic. The cost of the original medication includes the costs of research and experimental work, these costs are simply astronomical: the development of one new drug from the initial stage of the searching for the “active” molecule until the completion of clinical trials and launch to the market is now estimated at an average of $1 billion. Here you also need to add brand fees and advertising costs because, in order to sell a new medicine, you need to know about it and want to buy it. Bright and quality packaging costs money, as well.
In the case of the production of generics, everything is much more cost-effective. There is no need to invent a medication and assess it. Thus, the formula of the active substance is the same, the effect of the drug is (theoretically) the same, but generics are cheap and affordable for people with low income. Nevertheless, experts always say: the original (expensive) drug is still more reliable and effective. A copy uses a cheaper substance and other auxiliary components. As a result, the quality of the medication suffers. During treatment, the effect may be worse, more side effects occur.