How do drug prices get picked? Some of it is simple economics. If you develop 20 drugs and 19 of them fail at various stages and one succeeds after a billion dollars in costs and bureaucracy, you are going to price it to make back all that lost money before generic companies are allowed to come along and sell your product without doing any work at all.

Some are not happy with that system, they believe companies should be able to both do creative work developing new drugs and then give it away. People who have never actually created a product think it's that easy and more transparency or forcing companies to charge less will work. Writing in the Journal of the Royal Society of Medicine, the authors of an essay on market-access agreements for anti-cancer drugs say agreements on prices are an opportunistic way for pharmaceutical manufacturers to keep official prices high.

There are two types of market-access agreements for drugs. Financial-based schemes, favored by the English NHS, which focus on the budget impact of a new drug and consist of price/dose discounts, and performance-based schemes, predominant in the Italian health system, which involve collecting clinical evidence and lead to payment only for patients responding to the new therapy.

You can imagine how many drug companies bother to exist in Italy, since they bear the up-front costs and may never get paid. 

"The emotive nature of cancer makes it difficult for health agencies to resist calls for reimbursement of even extremely expensive drugs with marginal efficacy,"
Dr Livio Garattini, of the  Mario Negri Institute for Pharmacological Research in Milan, said,
"While performance-based schemes are not without political appeal, they contribute little to robust clinical assessment in practice. Simple financial-based contracts seem more efficient as a means for health services to reduce outlay on costly anti-cancer drugs and achieve access for patients."

Nonetheless, they believe the financial arrangements between pharmaceutical manufacturers and the health systems paying for the new drugs are kept commercial-in-confidence, leading them to conclude that when market-access agreements lead to prices which are not transparent, the schemes simply penalize those countries which rely on external reference pricing. "This lack of transparency raises an issue of public interest on the international level," said Garattini.

Which seems better than not having new drugs at all.