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Conference Agenda

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Session Overview
1c. Economics: Pricing Tools to Improve Medicines Affordability - 1
Time: Tuesday, 15/Nov/2011: 10:15am - 11:15am
Session Moderator: Margaret Anne Ewen, Health Action International, Netherlands, The
Session Moderator: David Henry, Institute for Clinical Evaluative Sciences, Canada
Session Rapporteur: Anthony D. So, Duke University, United States of America
Location: Ametist


Price Information Exchange for Selected Medicines in the World Health Organization Western Pacific Region

Dardane Arifaj-Blumi

World Health Organization Western Pacific Regional Office

Problem Statement: Prices of medicines procured in the public sector vary greatly between countries in the Western Pacific region and the prices are often not publicly available. Countries in the region have expressed the need for establishing a transparent mechanism for information exchange which will help them to assess procurement efficiency and provide leverage when negotiating prices with suppliers.

Objectives: To establish a platform for information exchange on procurement prices of medicines in the Western Pacific region which will enable countries to assess their procurement prices against other countries in the region and the international median prices; use the information to influence policy and managerial decisions on reducing prices that appear high; and to provide leverage for in-country negotiations with suppliers.

Setting: Regional level involving member states and focusing only on public sector. Study Population: Member countries of the WHO Western Pacific region were invited to participate of which 18 countries responded between May and October 2009 and 14 countries between June and November 2010, respectively.

Intervention: Participating countries shared procurement prices for 31 (in 2009) and 40 (in 2010) common medicines obtained in the most recent procurement cycle using structured questionnaires. Information on countries' procurement systems was collected using semi-structured questionnaires. Gathered information was processed, screened for quality, and displayed in a customized website.

Outcome Measure: Establish a publicly accessible website where users can view comparatively details on procurement prices for selected medicines. Increase transparency and information sharing between countries in the region. Update prices annually.

Results: The website Price Information Exchange for Selected Medicines (www.piemeds.com) allows users to browse by medicine's name where details on prices can be found on product name, pack size, price per pack and unit, manufacturer, supplier, and quantity procured. These data represent the public procurement prices at the time of data collection In addition, charts can be generated to allow comparison between prices of 2009 and 2010. International and regional median prices are presented in vertical lines for use as benchmarks. When browsing by country, a brief description of countries' medicines procurement system complements interpretation of charts. Links are also provided to the countries' health information profiles. Other features include a description of the website, glossary, links to resources on prices and procurement systems, forum, and a data collection form that can be downloaded for countries that wish to participate.

Conclusions: The new, user-friendly website www.piemeds.com enables countries in the region to share information on the prices of selected medicines procured in the public sector. Countries can use it primarily for assessing their procurement efficiency and as a tool to get leverage when negotiating with suppliers. Presentation through comparative bar diagrams makes information on prices transparent and easy to use.

Funding: WPRO


Challenges of Health Care Financing and Access to Medicines in Low-income Countries of Asia

Soonman Kwon

Seoul National University, Korea, South (Republic of)

Problem Statement: This conceptual paper examines the key policy issues and challenges of health care financing related to access to medicines in low-income countries of Asia. Health care financing in low-income countries of Asia can be examined in terms of resource generation, resource pooling and purchasing/payment. Limited funding to health care has been a chronic problem, resulting in high out-of-pocket payment and limited financial protection especially for the poor. Expenditure on medicines has been a major source of out-of-pocket payment in many low-income countries of Asia.

Objectives: Introducing a separate financing mechanism for medicines is not efficient. Instead, health care financing needs to expand the benefit package to include medicines. This paper compares the tax and SHI (Social Health Insurance) approach in minimizing out-of-pocket payment for better access to medicines and health care. Without government subsidy, social health insurance tends to have a limited effect on the population coverage in the informal sector and the poor, who have a limited capacity to pay contribution. Traditional approaches of covering the formal sector first through social health insurance and incrementally extending it to the informal sector has not been successful in Asia, with the exception of the countries with very rapid economic development. Furthermore, fragmented health insurance system with multiple payers cannot have a financial leverage and bargaining power with respect to medical providers and pharmaceutical suppliers.

Conclusions: Access to medicines can be also enhanced by improving the efficiency in purchasing and payment systems for health care providers, but the role of price regulation of pharmaceuticals and the incentivizing/regulation of provider behavior in the prescribing of pharmaceuticals is very limited.

Funding Source: Not applicable


External Reference Pricing (ERP): Existing Evidence and Lessons for Developing Countries

Jaime Espín1, Joan Rovira2, Antonio Olry de Labry1,3

1Andalusian School of Public Health, Spain; 2University of Barcelona; 3CIBER Epidemiología y Salud Pública (CIBERESP), Spain

Problem statement: ERP can be defined as “the practice of using the price(s) of a pharmaceutical product in one or several countries in order to derive a benchmark or reference price for the purposes of setting or negotiating the price of the product in a given country.” Although many countries use ERP, information on how ERP is applied and on the impact of this approach is limited, especially in developing countries.

Objective: Describe, analyse, and discuss the use and impact of ERP with a particular focus on low- and middle-income countries

Design: (1) Literature search and synthesis of the international literature on the application and impact of ERP. (2) A 27-question survey was designed with 11 multiple choice questions and 16 open questions. A pilot test was done in July 2009 to a subgroup of 3 countries. Based on previous studies on price regulation policies and other information provided by HAI and WHO, all countries apparently using ERP and the appropriate contact persons from the drug price regulatory agencies were identified. The questionnaire was sent to 11 countries, 9 of which responded—Brazil, Czech Republic, Hungary, Iran, Jordan, Lebanon, South Africa, Sultanate of Oman, and United Arab Emirates; Colombia and Mexico did not respond.

Results: Most of the surveyed countries use ERP for all medicines, the exceptions being Brazil, which applies it only to on-patent products, and the Czech Republic, which restricts ERP to publicly reimbursable medicines. Iran states that ERP is used only for imported medicines. The countries used as references are usually selected from the same region and from similar income levels. However, some countries from other regions are often used (i.e., Spain, France, United Kingdom) because they have low prices and good availability of information. The sources of information are mainly the manufacturers’ price certificates and websites of the reference countries. Some countries claim to expect price decreases, but none provides empirical evidence of the said effect. Studies found in the literature search find that ERP seems to cause price convergence as well as launch delays in low-price countries.

Conclusions: ERP does not have a clear economic rationale. In spite of its widespread and increased use, there is limited evidence on its intended and unintended effects, which are likely to depend on the particulat way it is applied—selection of reference countries, formula to derive the target price, etc. It can nevertheless be a pragmatic option for countries unable to apply alternative pricing mechanisms and willing to rely on other countries’ pricing policies.

Funding source: WHO/HAI


An Analysis of the Global Fund’s Price and Quality Reporting Database

Thomas Patrick Aylward, Sophie Logez, Thuy Huong Ha, Monika Zweygarth, Carmen Perez Casas

The Global Fund to Fight AIDS, Malaria and Tuberculosis, Switzerland

Problem Statement: The Global Fund believes that the disclosure of information on prices paid for purchases is a matter of principle and facilitates a process leading to lower prices. The procurement of pharmaceutical and health products accounts for approximately 35% of all funds disbursed and as a result the Global Fund has tracked and made publicly available transaction level procurement information since 2005 which is stored in a database called the Price and Quality Reporting System (PQR). The information contained in the PQR has been a valuable tool for the Global Fund, other organizations, and researchers. However, data quality issues and a lack of effective operational reports have limited the use of PQR information amongst procurement practitioners.

Objectives: To describe the data quality challenges and solutions associated with collecting procurement information from several hundred users in 114 countries. To illustrate how procurement data is informing decision makers at the Global Fund and at the country-level. To provide some high level insights on the procurement of key medicines by Global Fund recipients.

Design: Descriptive review of policy implementation.

Setting and Study Population: International and national organizations involved in procurement of pharmaceutical and health products using Global Fund financing. From February 2009 to September 2011, the Global Fund collected information on 10,544 procurement transactions costing more than US$ 1.8 billion.

Intervention: The PQR has recently been overhauled to (1) improve data quality, (2) increase the completeness of reporting, (3) produce useful reports for procurement practitioners, and (4) facilitate benchmarking of prices against international references.

Results: By standardizing data, improving user interface design, and increasing data governance efforts, the Global Fund has significantly improved the quality of procurement data collected from its recipients. These improvements have enabled the Global Fund to create automated reports that provide recent price indicators, facilitate cross-country comparisons, and track compliance with the Global Fund’s Quality Assurance policies. The PQR has also enabled the Global Fund to evaluate price differentials across countries and to benchmark prices against international references.

Conclusions: The Global Fund’s PQR is a key source of data on procurement by developing countries around the world. With its improvements the PQR is becoming a more useful and informative tool for procurement practitioners. Additionally, the improved PQR can contribute to improving transparency in the market for pharmaceutical and health products.

Funding Source: The Global Fund


A Win-Win Solution? Critical Analysis of Tiered Pricing to Improve Access to Medicines in Developing Countries

Suerie Moon1,2, Elodie Jambert1, Michelle Childs1, Tido von Schoen-Angerer1

1Medecins Sans Frontieres, Campaign for Access to Essential Medicines, Switzerland; 2Kennedy School of Government & School of Public Health, Harvard University

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