Why Are HIV Medications So Expensive?

It's no secret that medications used to treat HIV and AIDS are expensive. Still, understanding what contributes to these costs can require a dizzying amount of research and economic knowledge. Let's look at a few basic contributing factors that may explain the steep price of treatment.

Market complexities

Pharmaceutical medications are bought and sold through complicated interactions among manufacturers, wholesalers, governments and medical institutions. The landscape of HIV and AIDS medications, in particular, is ever-changing and subject to price differentials based on market availability for dozens of different medications, as well as a series of price estimates derived from different indexes.

There are essentially four separate pricing indexes used to determine the cost of pharmaceutical products. These are called the wholesale acquisition cost (WAC), suggested wholesale price (SWP), average wholesale price (AWP) and direct price (DIRP or DP). A full breakdown of what each pricing index entails can be found here.

Wholesalers control a substantial portion of the pharmaceutical sales market. Generally speaking, the cost of medications purchased outside of a wholesale agreement include a 20 percent markup on those medications. This tends to also be the case for prices listed under the AWP, which is basically the asking price produced by pharmaceutical manufacturers to be considered by wholesale buyers.

Wholesale buyers are the "middle men" in the equation. They purchase medications directly from manufacturers and sell them to institutions and medical providers. By purchasing medicines in bulk and then marking the prices up at various levels to many different retailers, they are some of the most profitable companies in the world. While many defendants of high drug prices in the United States (especially regarding HIV and AIDS medications) argue these soaring revenues contribute to research and development of new drugs, recent studies indicate pharmaceutical manufacturers and wholesalers spend about twice their R&D budget on sales and marketing to guarantee a consistent return on investment.

Medicine in multiples

Medications for the treatment of HIV and AIDS are somewhat unique within the pharmaceutical market due to the way they're both constantly fluctuating and overlapping.

HIV and AIDS are primarily treated with a prescription of antiretroviral medications. Over the last decade, it has become increasingly common for those medications to be delivered via a single pill that generally contains multiple medications; previously, these had to be taken separately and with adherence to specific daily protocols. The development of these new drugs has led to fewer side effects, and beyond that, they are taken on a more successful, regular basis. Single-ingestion medicines make it easier to maintain consistency than does a complicated array of different medications.

However, these new medications also allow drug companies to repackage old medicines into new patents, meaning it will be at least another 20 years before a generic version of the drug is available at lower prices than the nongeneric version. At the same time, medicines with expired patents are repurposed into new medications for purposes like pre-exposure prophylaxis (PrEP), so they are able to continue contributing to the bottom line of large-scale pharmaceutical manufacturers.

Patent protections are unique

Pharmaceutical companies in the United States are afforded an unprecedented level of protection from market competition through a variety of regulations and unique circumstances. A primary factor is that the consumer demand for HIV and AIDS medications is specifically focused on newer, single-ingestion options. Basically, one-pill options for medication have dominated the market. They are prescribed favorably by physicians, covered favorably by insurance options and sought-after favorably (and understandably) by patients who wish to simplify their treatment options.

This creates problems for generic-drug makers that wish to offer the same products at discounted prices compared to nongeneric options. Many of these combination drugs gained FDA approval no earlier than 2014, and as such they will experience market exclusivity well into the 2030s. Without generic drugs to compete with, and with government contracts guaranteeing the longstanding purchases of nongeneric drug options, pharmaceutical companies and wholesale buyers can dictate the price-per-pill at their own discretion.

The cost of production

The cost of manufacturing HIV and AIDS medicines is relatively low compared to the cost of purchasing them at the consumer level.

Recent research exploring gaps in the cost of HIV/AIDS and other essential medicines showed the price per unit of developing such drugs at the generic level can be as low as anywhere between $0.01 and $1.45. Nongeneric medicines used to treat HIV/AIDS typically range in the area of $123 or more per pill or unit.

This means the markup of such lifesaving medicines is routinely more than 100 percent. Considering how little of the profit actually goes toward research and development versus sales and marketing, it's hard to justify such distinct differences in price of production versus price of consumption for products that people quite literally depend on to survive.

Pharmaceutical nuance

Pharmaceutical manufacturers and the wholesale buyers that dominate distribution of their products have an important role to play in the lives of patients and healthcare providers.

When it comes to medications that dictate a person's quality of life and chance of survival, such as is the case with antiretrovirals and other HIV/AIDS-related medicines, cost really shouldn't be a factor, especially when considering the low cost of production and marginal budgets allocated for research and development of these drugs.

Unfortunately, patients and even insurers only have so much say in how medications are priced and offered to them. The federal government works with wholesale buyers and drug manufacturers to provide patients with options, but ultimately the burden of finding a comprehensive and effective plan lies with the patient.

If you're living with HIV or AIDS and have concerns about your medications or the costs associated with them, make sure to get help with programs like the Ryan White Program, Medicaid or state-sponsored healthcare options, which may be available to you to guarantee access to the medications you need.