Medicine prices: a WHO/Health Action International

collaborationThe approach, some results, and

implications for policy to improve the affordability of medicines

Andrew Creese, EDM/WHO

2

Structure of presentation

• Purpose: help people concerned with access to medicines to find ways of getting better medicine prices

• Approach - the recommended survey method• Some results from studies so far, and their

implications for policy• What next?

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Purpose

To promote analysis of medicinesaff ordability, what makes up retail price, andof price diff erences within countries with aview to improving prices and thus access toessential drugs.

To develop a simple and reliable methodologyfor collecting and analysing retail drug pricesacross health care sectors both within andbetween countries (primarily low- and middle-income).

To make data f reely accessible on a publicweb site so international price comparisonsare possible

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Background

• Some evidence that retail medicine prices can be higher in low income countries than in high income settings

• Practical difficulty of obtaining reliable, up-to-date information on drug prices, particularly in low income countries

• Methodological difficulty of making international price comparisons

• Approach to improve price transparency and empower actors concerned with health and medicines policy

• WHO-Public Interest NGO Roundtable an opportunity to launch such an initiative

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The WHO/HAI approach - its technical basis

• Systematic sampling of medicine outlets in at least 4 areas, with a minimum of 10 pharmacies per area:

• prices of 30 preselected commonly used medicines in at least public and private sectors

• predetermined dosage forms and strengths• Supplementary lists encouraged, adapted to local needs• Innovator brands and different generic prices sampled• All components of price from manufacturer to retailer

identified• Local prices compared to international reference prices• Excel workbook accompanies manual

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category type route off-patent 1Amoxicillin 250 mg tab MSH AB acute oral 2

Ceftriaxone 1 g/vial vial MSH AB acute injection 1Ciprofloxacin 500 mg tab MSH AB acute oral 1

Cotrimoxazole suspension 8+40 mg/ml 100ml MSH AB acute oral 2Phenytoin 100 mg tab MSH AEP chronic oral 2

Carbamazepine 200 mg tab MSH AEP chronic oral 2Artesunate 100 mg tab MSH AM acute oral 0

Sulfadoxine + Pyrimethamine 500+25 mg tab MSH AM acute oral 2Beclomethasone inhaler 0.05 mg/dose 200 dos MSH asthma chronic inhalant 2

Salbutamol inhaler 0.1 mg/dose 200 dos MSH asthma chronic inhalant 2Aciclovir 200 mg tab MSH AV acute oral 1Atenolol 50 mg tab MSH CV chronic oral 2

Captopril 25 mg tab MSH CV chronic oral 2Hydrochlorothiazide 25 mg tab MSH CV chronic oral 2

Nifedipine 10 mg tab MSH CV chronic oral 2Losartan 50 mg tab MSH CV chronic oral 0

Lovastatin 20 mg tab MSH CV chronic oral 0Glibenclamide 5 mg tab MSH diab chronic oral 1

Metformin 500 mg tab MSH diab chronic oral 2Omeprazole 20 mg tab MSH GI chronic oral 1

Ranitidine 150 mg tab MSH GI chronic oral 1Fluconazole 200 mg tab MSH HIV chronic oral 0

Nevirapine 200 mg tab MSH HIV chronic oral 0Zidovudine 100 mg tab MSH HIV chronic oral 0

Indinavir 400 mg tab MSH HIV chronic oral 0Diclofenac 25 mg tab MSH NSAID chronic oral 2

Amitriptyline 25 mg tab MSH psych chronic oral 2Fluoxetine 20 mg tab MSH psych chronic oral 1Diazepam 5 mg tab MSH psych acute oral 2

Fluphenazine 25 mg/ml amp MSH psych chronic injection 2

“Core” list of drugs for price comparison

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Some initial results and policy messages-

• Brand versus generic price differences• International differences in brand prices• Need to separate manufacturers’ selling price from

other “add-ons” for decisions on appropriate lines of policy

• …these and more available on the HAI website: www.haiweb.org/medicineprices

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Some results: (1) brand versus generic price ratios - ciprofloxacin

0102030405060708090

100

Price ratio

Armenia Brazil Peru Sri Lanka

Originator brand

Generic

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Captopril - ratios to international reference prices

02468

1012141618

Originator brand

Generic

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Furosemide - ratios to international reference prices

0

20

40

60

80

100

120

Armenia Brazil Kenya South Africa Sri Lanka

Originator brand

Generic

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Analysis of differences in ratios to international reference prices across

countries

These 3 examples show

• the huge difference within countries between originator brands and generics prices: ”brand premium”

• variation between same brand across countries

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Originator brand premiums - median of all medicines surveyed in retail pharmacies, 7

countries

0 2 4 6 8

South Africa

Philippines

Armenia

Sri Lanka

Kenya

Peru

Ghana

Average

MEDIAN INNOVATOR BRAND PREMIUM

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OVERALL BRAND PREMIUMS:branded median/unbranded median

Germany 1.08

Italy 1.34France 1.39

United Kingdom 2.52 Kyrgyzstan 2.60Czech Republic 2.67Poland 3.23Russia 3.33

Tajikistan 8.33

Source: Tafuri, Creese, Reggi (forthcoming)

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Analysis of originator brand vs generic prices

• In the PUBLIC sector originator brand premium may not be an issue if just one generic medicine is available

• Originator brand premium becomes an issue where – the generic medicine is not available in public sector

and therefore has to be purchased from private sector, or

– the medicine is patented and therefore faces no competition, e.g. in Kenya fluconazole price was 57 times the international reference price

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Policy options to reduce originator brand premiums

For LDCs (until 2016), and those countries still not compliant with TRIPS, or where a given medicine is not patented: use other, cheaper, available sources

For those already compliant with TRIPS, and where the medicine is patented: there are legal means of introducing it from alternative

sources: Governments to use the flexibilities of TRIPS for

patented medicines to introduce generics while patent is in force

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Governments to facilitate quick penetration of generics when patent is about to expire:

- fast tracking generic applications- use Bolar exceptions

• Generic policy on:- substitution- prescribing- consumer education on availability and acceptability of generics

• Change remuneration policy to dispensing fees and degressive margins

Policy options to reduce originator brand premiums

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Initial results (2) International differences in originator brand prices – Furosemide

Lasix® (Celltech)

0

20

40

60

80

100

120

Armenia Brazil Kenya South Africa Sri Lanka

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Prices of originator brands vary considerably between countries

• Why? – Different control and regulation of prices within

countries: the industry sets the maximum price allowed, or the maximum price the market can absorb in the absence of control

- for some (more recent) drugs, absence of competition in some markets

• Where to act? Policy options to correct it:– Goverment to establish price regulation - from

Manufacturer selling price (MSP) to margins in WHOLESALE and RETAIL and/or profesional fees

– Perform (international) price comparisons and price surveys routinely

– Make avaialble, and stimulate use of, equivalent generics when possible (if cheaper!)

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Some results (3) - Price components analysis: Furosemide (brand)

0

20

40

60

80

100

120

Armenia Kenya Sri Lanka

Add- on

MSP

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Price components (total markup as % CIF price)

0 % 20 % 40 % 60 % 80 % 100 % 120 % 140 % 160 %

South Africa publicprocurement

Sri Lanka public

Sri Lanka private

Armenia private, observedminimum

Armenia private, observedmaximum

Kenya private, observedminimum

Kenya private, observedmaximum

Peru private, observedmaximum

customs, fees, insurance, clearance import tax importer mark-up

distribution/wholesale mark-up retail mark-up VAT

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Price components - interpretation

• add-ons vary tremendously both in type and quantity, – e.g. in private sector in Sri Lanka = 60 % ... in Peru > 100

%

• Governments in some countries are taxing the sick by applying high import duties and taxes and adding VAT– e.g. in Peru a 41.5 % VAT is added

• as most of add-ons are applied as percentages, the higher the starting price, the higher the final price:

• While it is essential in the surveys to evaluate the add-ons, it is equally important to know the manufacturers’ prices

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Policy options to correct higher prices due to add-ons

• Countries should cease taxing essential medicines• There is a need to regulate mark-ups for importers,

wholesalers and retailers. Competition likely to be more effective than regulation in many settings.

• Need to shift policies from mark-ups to fixed fees • Need to introduce degressive mark-ups to encourage

the dispensing of generics

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Price components - limitations

• In general, procurement and/or manufacturers’ selling prices are very difficult to get

• They have to be estimated from retail prices by consulting relevant sources on the type and size of duties, taxes and mark-ups in the different sectors

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Manufacturers’ selling price in public sector

4,96

0,91

12,62

2,7

5,13

1,03

0123456789

1011121314

SouthAfrica

Kenya Sri Lanka

OriginatorbrandGeneric

MPRs for public sector procurement – all medicines surveyed

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Procurement in public sector

• Good procurement - efficient, transparent, evidence-based, allows countries to obtain even better prices than the reference prices (The MSH reference prices are mostly generics offered by international non-for-profit suppliers, and/or for profit international suppliers or tender prices)

• If expensive originator brands of off-patent medicines are publicly procured this suggests procurement problems; need to examine procurement methods

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Policy options to improve procurement

• Examine efficiency of national procurement processes to ensure best practice

• Use international reference prices as guidelines• Do international price comparisons: in many countries,

dramatically cheaper products are purchased and used (as seen in surveys to date)

• Competitive purchasing with price transparency• Pool procurement with other national/international

buyers• Use of pharmacoeconomics and other systems to fix MSP

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Limitations of the surveys• These are mostly small scale studies. Larger, regular price

monitoring mechanisms are needed

• With the data we have we cannot document that introducing generics lowers innovator brand prices (brand prices may remain high despite competition).... but generic introduction does make cheaper medicines available

• Using price data alone does not give the full picture and they need to be linked to additional information on the pharmaceutical sector

• No pilot has included unlicensed sellers of medicines or dispensing doctors who are important sources for many people

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• More systematic approach to components needed to get close to manufacturers’ selling prices in many settings

• Reference prices are import/bulk purchasing or tender prices: may be a low benchmark for comparing retail with wholesale or import prices. More reference price sources being explored.

• Using one source of reference prices limited the selection of medicines: the selected ones may not reflect national therapeutic usage.

• Our core list has few single-source (recent ) medicines

Limitations : areas for improving the approach

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To be studied

• To evaluate the impact of generic competition :– future surveys should examine the number of

generic equivalents registered in the country and their availability in facilities

– Market shares should also be investigated if possible• For therapeutically equivalent medicines, the influence

of penetration of new ones (often patented) in the market should also be investigated

• Need to investigate difference in prices between branded generics and non-branded generics

• ….much else!!

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Some (early) take-home messages

• Medicine price policies should be based on evidence.• Price information should be transparent, and prices

monitored regularly• Policies aimed at increasing availability and use of

generics should be implemented widely • Measures to improve public sector procurement and

availability should be implemented• Essential medicines should not be taxed• Mark-ups in private sector must be regulated.

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What next?

• Check the HAI web site: http://www.haiweb.org/medicineprices

• Pre-survey workshops - Cairo (20-22 October 2003), Tunis (in French - early 2004), Bangkok (April 2004)

• In-depth studies - drug prices for HIV/AIDS, monitoring effects of price deregulation

• Linked with TRIPS-monitoring project (Impact of globalization on access to drugs)

• Are you interested in undertaking a medicines price study?