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A “Win-Win Solution?”: A critical analysis of tiered pricing to improve access to medicines in developing countries

A “Win-Win Solution?”: A critical analysis of tiered pricing to improve access to medicines in developing countries.

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A “Win-Win Solution?”: A critical analysis of tiered pricing to improve access to medicines in developing countries

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  1. A “Win-Win Solution?”: A critical analysis of tiered pricing to improve access to medicines in developing countries Based on an article by the authors: “A ‘win-win’ solution?: A critical analysis of tiered pricing to improve access to medicines in developing countries.” Globalization and Health 2011 7:39. doi:10.1186/1744-8603-7-39. Available: www.globalizationandhealth.com/content/7/1/39/abstract 3rd International Conference for Improving Use of Medicines (ICIUM) Antalya, Turkey 14-18 November 2011 Suerie Moon,1Elodie Jambert,2 Michelle Childs, 2Tido von Schoen-Angerer2 1Harvard School of Public Health & Harvard Kennedy School of Government 2Médecins Sans Frontières (MSF) Campaign for Access to Essential Medicines Questions and comments welcome: smoon@hsph.harvard.edu

  2. Abstract Problem statement: Ensuring the affordability of medicines in developing countries is a critical policy challenge, particularly for newer medicines under patent. At the same time, establishing an equitable system for global contributions to medicines R&D has remained elusive. Policy proposals to improve access to medicines, such as tiered pricing, should be critically assessed to gauge how well they achieve these joint goals. Objectives: Tiered pricing – the selling of health technologies in developing countries at prices systematically lower than those in industrialized countries – has received support in situations where the seller exerts significant power over pricing (limited or no competition because of patents, small markets, or other barriers to market entry). We reviewed recent policy discussions on tiered pricing for HIV/AIDS, TB, malaria, kala azar, and vaccines. Design: We conducted a policy evaluation using 3 questions central to international debates: (1) How can medicines be made affordable in developing countries? (2) Who should pay for R&D and how much? (3) Who decides and how? We carried out case studies based on a review of international drug price developments for antiretrovirals, artemisinin combination therapies, drug-resistant TB drugs, liposomal amphotericin B (for kala azar), and pneumococcal vaccines to examine the impact of tiered pricing and competition. Setting: Developing countries, including low- and middle-income countries Outcome measures: Price trends in the public sector of developing countries Results: Tiered pricing may meet short-term needs for access to a product in special cases such as when market volumes are very small or multi-source production capacity is lacking. However, tiered-pricing suffers from a number of critical shortcomings: it is inferior to competition as a way to achieve the lowest sustainable prices; it often involves arbitrary divisions between markets and/or countries, which can lead to perverse outcomes such as very high prices for middle-income markets; and it leaves a disproportionate amount of decision-making power in the hands of sellers vis-à-vis consumers (i.e., governments or patients). In many developing country contexts, resources are often stretched such that affordability can only be approached by selling medicines at or near the cost of production. Conclusions: In general, competition should be the default option for improving the affordability of important medicines for use in developing countries, as it has proven superior to tiered pricing to achieve the lowest sustainable prices. In special cases where tiered pricing is justified, steps should be taken to ensure affordability and availability in the longer term, including auditing production costs, improving production efficiency, and/or transferring technology to transition as quickly as possible to competitive multi-source supply. Alternate strategies should be explored that harness the power of competition, avoid arbitrary market segmentation, and recognize government responsibilities for ensuring access to medicines for their populations. In particular, policies that ―de-link‖ the financing of R&D from the price of medicines merit further attention, because they can reward innovation while exploiting robust competition in production to generate the lowest sustainable prices. • Funding source: Médecins Sans Frontières

  3. Overview • Introduction to tiered pricing • How to make medicines affordable in developing countries? • Who should pay for R&D & how much? • Who decides and how? • Alternatives to tiered pricing • Conclusions: • When tiered pricing? • When alternatives to tiered pricing?

  4. 1. Introduction (1/2) • What is tiered pricing? • Different prices for different markets, • Correlated with ability to pay (lower income = lower price) • It may be applied when: • Markets can be separated • Seller exerts significant control over pricing (e.g. patents) • Seller’s perspective: • Tiered pricing = Differential pricing = Market segmentation = Price discrimination = Profit maximizing strategy • Consumer’s perspective: • Equity pricing = “intended to be available within the context of functioning health systems at all times in adequate amounts…at a price the individual and the community can afford” (WHO Essential Medicines concept)

  5. 1. Introduction (2/2) • Context • Increased patenting in developing countries (TRIPS) • Immense unmet health needs in developing countries • Globalization & political demand for access • Emerging markets driving pharmaceutical industry growth • TP widely applied for HIV/AIDS, malaria, TB drugs; vaccines; contraceptives • Renewed interest in TP as emerging markets strategy • e.g. Sanofi, GlaxoSmithKline, Merck, Novartis, Roche • Methods: reviewed experience in HIV/AIDS, malaria, TB, kalaazar, pneumococcal vaccine

  6. 3 Key Questions on Tiered pricing 1. How to make medicines affordable in developing countries? 2. Who should pay for R&D & how much? 3. Who decides and how?

  7. Competition reduces prices:Evidence from HIV/AIDS • Waning et al (2009): • >7000 antiretroviral (ARV) transactions (2002-2007) • For 15 of 18 products, tiered-priced drugs were 23-498% higher than generics • By 2011, of remaining 3 products, 2 had lower-priced generics available • MSF Untangling the Web (2011): • tiered prices > generic prices for: • 27 of 30 (90%) of quality-assured products Sources: Brenda Waning, Warren Kaplan, Alexis C. King, Danielle A. Lawrence, Hubert G.Leufkens, Mathew P. Fox. (2009). Global strategies to reduce the price of antiretroviral medicines. Evidence from transactional databases. Bull World Health Organ 2009;87:520–528 | doi:10.2471/BLT.08.058925. MSF Untangling the Web of Antiretroviral Price Reductions, 14th edition (http://utw.msfaccess.org/, last accessed 8 November 2011).

  8. Competition reduces prices:Evidence from HIV/AIDS

  9. Tiered prices respond to competition:Evidence from HIV/AIDS Source: http://utw.msfaccess.org/drugs/lopinavir-ritonavir

  10. Tiered prices respond to competition:Evidence from Malaria Source: Moon, S., Pérez Casas, C., Kindermans, J., de Smet, M., & von Schoen-Angerer, T. (2009). Focusing on Quality Patient Care in the New Global Subsidy for Malaria Medicines. PLoS Medicine, 6(7), e1000106. doi:10.1371/jounal.pmd.1000106

  11. Tiered pricing for small markets: Evidence from DR-Tuberculosis • Small, uncertain, fragmented global market for some drug-resistant TB medicines • Eli Lilly offered tiered pricing, and simultaneously transferred technology to produce two DR-TB drugs to generic firms Price and quality information. Price of the lowest unit (i.e. the price of one tablet, capsule or vial) in US$. Sources: British National Formulary 2010 ; Global Fund 2010; Management Sciences for Health 2009; personal communication, M. Price, 2010. Price and quality information. Price of the lowest unit (i.e. the price of one tablet, capsule or vial) in US$. *In future, the lowest available price is expected to change as the Akorn product replaces Eli Lilly's.

  12. The “middle income country problem” • Tiered pricing classifications: wide variation, no norms • Per capita GNI (low vs middle-income countries)* • HIV prevalence • UN-classified least-developed countries • Human Development Index • Regions • Which countries should pay more? On what grounds? What is a fair price? • 33 ARVs with Category 1 (~LICs) and Category 2 (~MICs) prices • Difference Cat 1 & 2 pricing: 20-1353 USD; 4.5% to 177% • No norms, no transparent basis for pricing • Tiering can seem arbitrary *World Bank classifications (per capita gross national income): low income $995 or less; lower middle income, $996 - $3,945; upper middle income, $3,946 - $12,195; and high income, $11,906 or more

  13. The MICs problem: Pneumococcal vaccines

  14. 4. Who decides and how? Government regulation of medicines prices (e.g. in high income countries): • Reference pricing • Setting reimbursement rates • Price controls • Pharmacoeconomic assessments • Compulsory licensing Under tiered pricing for developing countries, sellers decide : • Price • Which countries eligible • For how long • Other conditions • Criteria for decisions not transparent “Access to drugs cannot depend on the decisions of private companies but is also a government responsibility.” –WHO Commission on IPRs, Innovation and Public Health (2006) “The primary obligation for implementing the right to health falls upon the national authorities in the State in question,” and “access to medicines forms an indispensable part of the right to the highest attainable standard of health.” – Paul Hunt, UN Special Rapporteur for Health & Human Rights (2002-08)

  15. 5. Alternatives to tiered pricing • “De-link” R&D market from medicines production market • i.e. do not pay for R&D through high medicines prices • i.e. pay for R&D via push & pull mechanisms • i.e. encourage competition in medicines production • Competitive production via: • Voluntary licensing, eg Medicines Patent Pool • Prizes, such as patent buy-outs • Non-granting of patents through strict patentability criteria • Voluntary non-patenting in developing countries • Compulsory licensing

  16. 6. Conclusions • How to make medicines affordable in developing countries? • Robust competition through de-linking R&D from medicines prices • Who should pay for R&D & how much? • Negotiate fair contributions from all countries for R&D • Calibrated R&D contribution from developing countries via fees or royalties (e.g. based on income, inequality, disease burden, cost-effectiveness of product, etc.) • Who decides and how? • Governments have responsibility for ensuring access to medicines as a fundamental component of the right to health • Tiered pricing: when? • Special cases: small, uncertain markets; limited production capacity, and/or urgent needs • Closely monitor prices and costs  Transition to competitive production (eg technology transfer) as possible • Alternatives that are better for access should be considered

  17. TeşekkürEderim/Thank you Comments welcome at: smoon@hsph.harvard.edu

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