An economic analysis of cancer drug pricing: Market failures, policy challenges, and equity implications

Abstract

The global cost of cancer treatment has escalated, with drug prices becoming a major barrier to access and sustainability in healthcare systems. This paper examines the economic drivers behind these high prices, including patent protections, market monopolies, inelastic demand, information asymmetry, and opaque R&D costs. Drawing on economic theory and recent literature, it finds that cancer drugs are often priced well above their clinical value. Pharmaceutical firms typically recover R&D costs rapidly but maintain high prices, generating profit margins disproportionate to therapeutic outcomes. Cross-country comparisons reveal stark disparities in affordability. In some middle-income countries, patients must work over two weeks on minimum wage to afford a single dose. These pricing practices place significant strain on individuals and healthcare budgets, especially where negotiating power is limited. The paper argues that current pricing models are economically inefficient and socially unjust. It recommends key reforms: reducing market exclusivity periods, implementing value-based pricing aligned with clinical outcomes, and enforcing transparency in R&D spending and pricing structures. These steps are critical to improving drug affordability, advancing equity, and supporting responsible innovation in cancer care.