The production of sophisticated drugs requiring an extensive period of development, and the advances in high technology medicine contribute significantly to rising medical expenses.
The total value, at retail prices, of all pharmaceutical products sold in the world during 1980 was US$ 90 billion. The (then) German Federal Republic spent US$ 55 per person per year (up to $200 a year in 1994); Japan US$ 40; and the USA $36; in contrast, Nigeria spent US$ 1.50 per person per year; India US$ 1.00; and Sri Lanka less than US$ 1.00. Yet in many countries the drug budget still represents a sizeable proportion of the total health expenditure. In developed countries it ranges from 10% to 30% of the total cost of health care; but, paradoxically, in some developing countries the percentages are much larger, reaching up to 50% or more, particularly because of the sales promotion activities of manufacturers which create a demand greater than actual needs.
In 2001, Cipla, an Indian company, offered to sell HIV drugs to South Africa and other governments for US $600 a year per patient, or about $400 below the price offered by most big drug companies that hold the patents. South Africa could take advantage of the offer only if it compelled the patent holders to license the drugs, for instance on the ground that in national emergencies, demand was not being met at fair prices. The multinationals argued that they need high prices in order to carry out their research, even though the prices put the remedies out of the reach of millions of people with HIV. But several companies did reduce their prices, some noting they would make no profit on the sales and others offering the discounted drugs to employers and nonprofit groups.