A Headache That Tylenol Doesn’t Cure

A headache is responsible for this article.  During my recent work in India, I got a headache while being driven from the office to a restaurant for a business dinner.  I asked the cab driver to stop at a pharmacy on the way to buy some paracetamol.

We stopped at a small roadside pharmacy (you will spot many of those in India, closely located to each other). I went to the counter and asked for a strip of Dolo-650, which is a brand name in India for 650 MG dosage of paracetamol (also known as acetaminophen).

Dolo-650 tablet pack label

For a strip of 15 tablets, I paid INR 26 (US$0.41), in other words, just over 2 cents per tablet.  Before popping one in the car, I noticed this drug was made by a company in Sikkim, which is an economically backward small state in India.  It is comparable, on a relative sense, to our Kentucky or Mississippi.

The tablet that cured my headache but caused another.

My headache disappeared within half an hour, just as the car was pulling into the restaurant’s entrance.  I later learned that the facility where the drug is made is FDA-approved and follows strict GMP (good manufacturing practices – a global pharma industry protocol).  Sure, the manufacturing labor costs in India are a fraction of US or Western Europe, but labor as a component of most drug costs are tiny anyway.  With automated, advanced manufacturing methods, a medicine’s total cost has barely a percent or two worth of labor costs in it.  So, even if you eliminated labor completely, you still have close to 99% percent of the costs remaining.

Yet, the prices are so damn low for essential medicines like acetaminophen in India.   Part of it is Indian regulations allowing only a low fixed margin for drugs labeled under the ‘essential’ category.  For comparison sake, I put the following table together.  Remember, unlike a McDonalds burger or a Dominos Pizza that can taste even a little bit different across the world, the item being compared here is 100% identical, that is, same dosage (650 mg) and chemically identical, down to the active molecule!  

Branded Tylenol 650 mg (source: Target.com, $9.99 for 100 tabs)

Generic acetaminophen tablets, 650 mg (source: Target.com, $6.99 for 100 tabs)

 

Source of Acetaminophen Cost Cost per constant dosage Difference
Small pharmacy in India (Dolo-650 brand drug made in a GMP facility) $0.41 per 15 tabs $0.0273 --
Generic equivalent in USA (650 mg) $6.99 per 100 tabs $0.0699 +156%
Branded equivalent in USA (650 mg) $9.99 per 100 tabs $0.0999 +266%

Even my fifth grader son would say this kind of percentage difference for the same item is yuuuuuge!

Until I became a globally mobile corporate manager, I never fully understood why prices for identical items are so vastly different across the world.  Sure, you can bring in concepts like per-capita income, regulations, purchasing power parity, country level demand-supply issues and taxation to explain much of the difference but the magnitude of cost difference above is simply beyond all these explanations.

Acetaminophen is not alone.  But nowhere is this kind of difference more apparent than in pharmaceutical prices. We are talking a common over-the-counter drug here, not some specialized prescription medicine developed after $500 million spent in R&D over 10 years that pharma companies understandably want to recover.  

When you combine ultra low pharmaceutical prices for common medicines (for identical quality) with low health care costs (with good clinical outcomes) in countries like Ecuador, India, Thailand and Malaysia, you wonder what the heck is wrong with our country that we can’t make healthcare more affordable in US.

It’s no wonder that many Americans are considering retiring abroad in locales where they have to make many lifestyle and cultural adjustments, just to tackle the healthcare beast.

US healthcare remains a headache that no overpriced Tylenol can cure.


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9 comments on “A Headache That Tylenol Doesn’t Cure”

  1. By ZJ Thorne

    These costs seem so arbitrary. I know that the fillers etc can be different, which matters to folks with allergies, but damn, over 200% difference!

  2. By Mrs. Groovy

    We saw a documentary that featured an American who traveled to India for quadruple bypass. It cost a fraction of what it costs in the U.S. And he was treated by an excellent specialist trained in the U.S. Traveling or relocating to get lower cost medical treatment is not out of the question for us. And it makes even more sense for those retiring younger.

    • By TFR

      True Mrs. Groovy. There are many such examples I know personally. I have even helped arrange such surgeries for folks who wanted a known source through me.

  3. By Lars-Christian

    I’ve been thinking about this as well, and it seems like an arbitrage opportunity just waiting to be exploited. I suspect red tape and regulations is very much to blame, though, without having done any research on the matter.

    It’s also strange how we will equate price with quality in pharmaceuticals as well. Some people (many) will insist on a brand they are familiar with over the generic white label version, which is the exact same pill. We’re just not very rational creatures, is my only conclusion.

    • By TFRadmin

      “It’s also strange how we will equate price with quality in pharmaceuticals as well. Some people (many) will insist on a brand they are familiar with over the generic white label version, which is the exact same pill. We’re just not very rational creatures, is my only conclusion.”

      Absolutely, Lars-Christian. I believe even the growing ‘movement’ of Americans seeking retirement abroad is largely because of healthcare costs. If there was an acceptable solution in their home country, many would not want to spend their golden years learning to adjust to new cultures.

    • By Full Time Finance

      In the US at least they’ve been cracking down on the arbitradge for fear of counterfeiting (which is a very real problem). Some would also say it is to protect their margins.

      I worked in Pharma a long time ago. At the time the company line was that the US was subsidizing these countries with fixed costs as even existing medicines kick in towards the next R and D wave. The secondary comment was our regulatory hurdles were higher, not just from a gmp perspective but other concerns around distribution and the aforementioned counterfeit protection. When I left pharma there was talk in the industry of even RFID tagging every pill to stop counterfeits. It was being weighed against the impact to privacy if someone scanned you and could tell what you were on. Ultimately the company line was no one complains about software companies or any number of other industries, yet pharma gets scrutinized for an under 10 percent operating margin which is below these other industries.

      Note, I’m not defending the point, just giving you the company perspective having worked in pharma a long time ago.
      Full Time Finance recently posted…How did I pay off $63K in Student Loan DebtMy Profile

      • By TFR

        Thanks for adding your previous industry perspective, FTF. It’s a good complement to a consumer perspective this article highlights. Ultimately, we are consumers of all industrial services, including pharma/healthcare. So, this kind of glaring pricing discrepancy for identical product makes you wonder.

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