Paying the price:
Medicine prices, availability
and affordability across the globe
Alexandra Cameron
Department of Essential Medicines and Pharmaceutical Policies
World Health Organization
November 2008
Presentation outline
1. International efforts to improve medicine prices
2. Generating reliable evidence: how to measure
medicine prices and availability
3. What have we learned about medicine prices,
availability and affordability?
4. Evidence to policy: what can be done?
Wider problems of medicine prices
• Medicines have variable and often high prices, and are
unaffordable for large sectors of the global population
and a major burden on government budgets
• Burden falls directly on most patients in developing
countries – but little is known about the prices people
pay and how these prices are set, from the
manufacturers’ selling price to the patient price
• Many developing countries do not have pricing policies
But, the prices of medicines are well above their production
costs so there is great scope for reductions
WHO/HAI Project on Medicine Prices & Availability
improve the availability and
affordability of essential medicines
• Outcome of the WHO/public interest NGOs Roundtable
on Pharmaceuticals and WHA resolution
• Develop a reliable methodology for collecting and
analysing price and availability data across healthcare
sectors and regions in a country
• Price transparency; survey data on a freely accessible
website allowing international comparisons
• Provide guidance on pricing policy options and
monitoring their impact
WHO/HAI standard methodology
• Survey tool to measure:
• medicine prices
• medicine availability
• affordability of treatments
• components in the supply chain
• 1st edition launched at WHA 2003
• About 60 surveys conducted to date
• Results publicly available on HAI website
• 2nd edition launched at WHA 2008
• adjustments to methodology
• practical advice based on surveys
• new guidance on international comparisons,
policy options, advocacy & regular monitoring
• additional tools and resources
Medicine price and availability surveys to date using
WHO/HAI methodology
Completed or nearing completion
Underway
Analyses
• Regional analyses:
Africa, India, Middle East,
Central Asia
• Therapeutic group
analyses: asthma,
diabetes cardiovascular
• Price & availability data
included in report on
MDG 8
• Secondary analysis
across 36 countries in
The Lancet
Work in progress
•
•
•
•
Evidence to policy
Measuring affordability
Total costs for treating chronic diseases
Regular monitoring of prices, availability
and affordability
• Further development of database and
website
• Etc., etc., etc.!
2. Generating reliable evidence: how to measure
medicine prices and availability
How is the survey conducted?
 Trained data collectors visit a sample of "medicine outlets"
and record information on the price and availability of selected
medicines
 Data on government procurement prices are also collected
 During medicine outlet visits, data are recorded on hard copy
Medicine Prices Data Collection forms
 At the end of fieldwork, completed forms are entered into the
electronic survey Workbook by data entry personnel
 The Workbook automatically generates analyses of the survey
data
 Medicine price components are also identified by tracking
medicines through the supply chain and identifying add-on
costs
What medicines are surveyed?
50 medicines:
–
30 pre-determined by WHO/HAI to enable international
comparisons (14 global medicines and 16 regional medicines)
–
20 selected nationally for local importance
Predetermined dose forms & strengths, & recommended pack sizes
For each medicine, two products are surveyed:
1.
Originator brand
2.
Lowest-priced generic equivalent (at facility)
Where are data collected from?
Patient price and availability data
 collected by data collectors visiting a
sample of medicine outlets in up to 4
sectors:
 public sector - health centres
 private sector - retail pharmacies
 1-2 other sectors e.g. dispensing
doctors
Government procurement prices
 Centralised system: collect from
procurement office or Central Medical
Store
 Decentralised: at outlet level
How is the sample of medicine outlets
selected?
• Data is collected in 6 regions
of the country ("survey areas")
– Area 1 = capital city
– 5 other regions within 1 days’
travel of capital, randomly
selected
• In each survey area:
– the main public hospital + 4
public outlets, randomly selected
from those within a 3 hours drive
of the main hospital, are
selected
– the private sector outlet closest
to each public outlet is selected
– The other sector medicine outlet
closes to each public sector
outlet is selected
Survey structure
COUNTRY
Survey area 1
Survey area 2
Survey area 3
Survey area 4
Survey area 5
Survey area 6
5 public outlets
5 private outlets
5 "other 1" outlets
5 "other 2" outlets
TOTAL: 20
5 public outlets
5 private outlets
5 "other 1" outlets
5 "other 2" outlets
TOTAL: 20
5 public outlets
5 private outlets
5 "other 1" outlets
5 "other 2" outlets
TOTAL: 20
5 public outlets
5 private outlets
5 "other 1" outlets
5 "other 2" outlets
TOTAL: 20
5 public outlets
5 private outlets
5 "other 1" outlets
5 "other 2" outlets
TOTAL: 20
5 public outlets
5 private outlets
5 "other 1" outlets
5 "other 2" outlets
TOTAL: 20
Data entry, quality assurance & analysis
 Training workshop & pilot test for data collectors and
supervisors
 At outlet visit, data are recorded onto the Medicine
Prices Data Collection Form. Form checked that day by
supervisor and verified in 20% of outlets
 At the end of fieldwork, all completed forms are entered
into the Excel Workbook by trained data entry personnel
 Data are entered twice and checked for errors
 Automated data checker identifies possible errors
 An additional data quality control check is conducted by
HAI or WHO before posting on the website
How are data analyzed?
 Availability: % of outlets where medicine was found on the day of data
collection
 Price: median local prices expressed as ratios to international reference
prices
Medicine Price Ratio (MPR) =
median local unit price
International reference unit price
– MSH international reference prices used: recent procurement prices offered by
not-for-profit suppliers to developing countries for multi-source generic equivalent
products.
– Medicine must be found in at least 4 outlets for MPR to be calculated
 Price comparisons: innovator brand and lowest priced generics; public,
private and other (e.g. mission) sectors; districts/states/provinces, countries
 Affordability: how many days wages would the lowest paid government
worker need to spend to pay for treatment
Price Components
•
Add-on costs tapplied to medicines as they move through
the supply chain, from manufacturer to patient
Examples: insurance & freight costs, port & inspection
charges, handling charges, import duties, import,
wholesale & retail mark-ups, VAT/GST, dispensing fees
•
2-part methodology:
1. Central level data collection on national policies that affect
pharmaceutical prices
–
2.
Collected through interviews with importers, Ministry of Health,
Ministry of Trade, Customs office, etc.
Identification of the price components of selected
medicines as they move along the supply chain.
–
–
Identified by tracking 5-7 medicines backwards through the supply
chain
At each stage (retailer, wholesaler etc) charges are recorded
Price components are analysed by stage of the supply chain
Price components data analysis

•
Data are entered into the
electronic survey
Workbook; standard
analyses are automatically
generated
Price components are
analysed by:
– cumulative per cent mark-up:
how much greater a certain
price is above the MSP
– % contribution of each stage
to the final price
•
Comparisons by sector,
region, medicine type (e.g.
originator vs. generic,
import vs. local)
Percentage contribution of price com ponents to final
price, Am oxicillin 250m g cap/tab, Private Sector, Im ported
Generic
0%
17%
11%
59%
7%
6%
Manufacturer's selling price
Insurance and freight
Stage 2: Landed price
Stage 3: Wholesale
Stage 4: Retail
Stage 5: Dispensed price
3. What have we learned about medicine prices,
availability and affordability?
Median % availability by World Bank income group
100%
max
90%
min
80%
mean
70%
60%
50%
40%
30%
20%
10%
0%
India
low
lower-
upper-
India
low
(n= 7)
income
(n= 15)
(n= 9)
(n= 2)
middle
middle
(n= 7)
income
income
income
(n= 17)
(n= 11)
(n= 2)
public sector
generics
lower-
upper-
India
low
middle
middle
(n= 7)
income
middle
middle
income
income
(n= 17)
income
income
(n= 11)
(n= 3)
private sector
generics
lower-
private sector
originator brands
upper-
Government procurement prices for lowest priced generics
6
5.37
5
4
max
3
min
2.94
mean
2
1.45
1.17
1
0.78
0.47
0.27
0
India
(n=7)
1.36
1.17
0.90
0.33
0.09
low income
countries
(n=16)
lower middle
income countries
(n=12)
upper middle
income countries
(n=3)
MPR = 1
Government procurement prices in 10
African countries
6
75th percentile
25th percentile
Median
4
Price (MPR)
n= number of medicines
3.29
2
1.69
1.3
0.95
0.8
0.57
0
0.88
0.61
0.66
0.71
Public sector patient prices
• In many countries medicines are free but availability is
often very poor
• Where patients pay, even cheapest generics can be
expensive e.g. in the Western Pacific Region the median
price was about 12x international reference prices
• Good procurement prices are not always passed on to
patients
• In some countries, public sector prices are similar to
private sector prices, e.g. China, Shanghai
Patient prices vs. procurement prices,
public sector, lowest-priced generics
3.1
3
2.9
n = number of medicines
2.4
2.2
2.2
2.1
2.1
2
2.0
P rice
(MP R )
1.4
1
n/a
0
C had
(n=13)
K enya
(n=22)
G hana
(n=22)
E thiopia
(n=36)
S enegal
(n=27)
C ameroon Mali (n=29)
(n=22)
Tanzania
(n=26)
Nigeria
(n=16)
Uganda (*)
Patient prices in the private sector:
median of Median Price Ratios, by WHO region
n=6
WPR
n=5
n=8
SEAR
n=9
Lowest priced generic
n=5
EUR
n=5
Originator brand
n=11
EMR
n=11
n=1
AMR
n=2
n=9
AFR
0
10
20
n=9
30
40
50
Median MPR across basket of 15 meds
60
70
Patient price in the public and private sector
lowest-priced generics, matched pairs of same medicines
16
P rivate
14.9
P ublic
P ric e (MP R )
12
n = number of medicines
9.3
7.3
8
5.3
4.0
3.5
4
4.0
3.3
3.1
2.0
2.4
1.8
1.3
2.9
2.1
3.9 3.5
2.9
2.6
2.0
1.3
0
0
C ameroon
(n=17)
C had
(n=5)
Mali
(n=30)
Tanzania
(n=28)
S enegal
(n=20)
G hana
(n=30)
E thiopia
(n=36)
K enya
(n=28)
Zimbabwe
(n=25)
Nigeria
(n=19)
Uganda
(n=38) (*)
Originator brand vs lowest-price generic prices
captopril 25mg tabs, private pharmacies
Cameroon
Kenya
Ghana
Lowest priced generic
Originator brand
Malaysia
India, Maharashtra
Pakistan
Indonesia
Peru
Kuwait
China, Shandong
0
5
10
15
median price ratio
20
25
Differences between originator brands & lowest priced generics,
matched pairs, private sector
400%
1000.3%
1464.7%
1464.7%
350.2%
337.7%
300%
265.3%
max
min
200%
mean
167.7%
157.4%
147.1%
100%
100.0%
55.9%
26.0%
0%
6.0%
0.0%
India
(n= 7)
0.0%
low income
(n= 14)
lower-middle
income
(n= 12)
upper-middle
income
(n= 2)
all countries
(n = 35)
Affordability: mean number of days wages of the lowest paid
unskilled govt. worker needed to buy 60 glibenclamide 5mg tabs,
for diabetes, in the private sector (by WHO region)
n=4
WPR
n=3
n=8
SEAR
Lowest priced generic
n=8
Originator brand
n=4
EUR
n=1
n=11
EMR
n=7
n=1
AMR
n=7
AFR
n=7
0
1
2
3
4
5
No. of days' w ages
6
7
8
9
Price components
Cumulative percentage mark-ups between manufacturer's selling price
and final patient price, private sector
Country
Total cumulative % mark-up
China (Shandong)
11-33%
El Salvador
165-6894%
Ethiopia
76-148%
India
29-694%
Malaysia
65-149%
Mali
87-118%
Mongolia
68-98%
Morocco
53-93%
Uganda
100-358%
Tanzania
56%
Pakistan
28-35%
Price components – private sector
Multiple taxes are applied:
•Peru: VAT 12% IGV 19% Municipal promotion tax 2% (eliminate taxes cumulative mark-up is reduced 238% → 149%)
•Indonesia: VAT 10% - charged twice
•Philippines: Import tariff 4% national taxes 3-6% VAT 12%
•Yemen Customs duty 5%, Taxes 5%
Wholesaler mark-ups: 2% (Pakistan) - 380% (El Salvador)
Pharmacy mark-ups: 10% – 552 % (El Salvador)
In some cases the manufacturer's selling price (MSP) is the largest
contributor to the final price
E.G. Pakistan - MSP for locally-produced generic amoxicillin represented
78% of the final medicine price in the private sector
Public sector mark-ups can also be significant
Large mark-up on a low-priced generic can result in a lower
final price than a small mark-up on a high priced product
Malaysia: atenolol 50mg tab, private retail pharmacies
Originator (patient price: 72 RM)
4: Retail 20%
3: Wholesale
13%
1: MSP, CIF
56%
2: Landed 11%
Generic (patient price: 24 RM)
1: MSP, CIF
40%
4: Retail 50%
3: Wholesale
3%
2: Landed 7%
4. Evidence to policy: what can be done?
Surveys of medicine prices and
availability reveal that:
• Availability is often low,
particularly in the public
sector
• Prices of even the lowestpriced generics can be
several times
international prices
• Originator brands are
more costly than generics
• Treatment of chronic
diseases is often
unaffordable, especially
when combination
therapies are used
High prices, low availability and poor
affordability can have many causes
• Low public sector availability: lack of resources
or under-budgeting; inaccurate forecasting,
inefficient procurement / distribution, low
demand/slow-moving products
• High private sector prices: high manufacturer’s
selling price, high import costs, taxes and tariffs,
high mark-ups
Many policy options exist
•
Improve procurement efficiency (e.g. national pooled purchasing, procurement by
generic name)
•
Ensure adequate, equitable, and sustainable financing, e.g.
– Health insurance systems that cover essential medicines
– schemes to make chronic disease medicines available in the private sector at public sector
prices
•
Prioritize drug budget, i.e. target widespread access to a reduced number of
essential generic medicines, rather than attempting to supply a larger number of both
originator brand and generic medicines.
•
Promote generic use:
– preferential registration procedures, e.g. fast-tracking, lower fees
– ensure the quality of generic products
– permit generic substitution and provide incentives for the dispensing of generics
– educate doctors/consumers on availability and acceptability of generics
I DON’T TAKE CHANCES
I ONLY USE ORIGINALS
Policy options (cont'd)
• Separate prescribing and dispensing
• Control import, wholesale and/or retail mark-ups through
regressive mark-up schemes
• Provide tax exemptions for medicines
• Where there is little competition, consider regulating
prices
• Patented medicines
– use the flexibilities of trade agreements to introduce generics
while a patent is in force
– differential pricing schemes whereby prices are adapted to the
purchasing power of governments and households in poorer
countries.
Must watch for unintended negative
effects
• Price controls may lead to excessive prices when
the price is not adjusted to consider changes in
the market
• Setting prices too low can discourage
production/stocking of a product
• Regulating mark-ups can provide incentive to sell
higher-priced products
• Eliminating taxes can provide an opportunity for
retailers to increase their margin (i.e. savings not
passed on to patient)
Examples of policy changes following
medicine price and availability surveys
Tajikistan
•
Elimination of 20% VAT on medicines in May 2006. Supply chain add-on costs
decreased from 122% to 85% for imported medicines.
Lebanon
•
•
•
Price reductions on >1000 individual medicines has reduced prices by 14% overall
Policy of fixed mark-ups irrespective of FOB price (cumulative 71.4%) to variable
depending on FOB price; estimated retail price reductions of 3-15%
Retail prices and pharmacy margins published on a public website
Examples of policy changes (cont’d)
United Arab Emirates
• Government reduced prices by an average of 7–8% through
modification of its procurement practices following price
comparisons with other countries.
Indonesia
• Pharmaceutical industry association announced that from 1
July 2006 it would reduce the price of 100 branded generic
medicines, containing 34 active substances.
• Branded generics should not cost more than 3 times the price
of true generics – has not happened for all products
East African Community:
• 10% cut on import duties on medicines.
Increased financial support and differential
pricing can have a dramatic impact on
medicine availability
Availability of Artemether/lumefantrine 20/120 mg in Kenya
100
91
90
86
86
80
76
% availability
70
72
68
61
60
58
public sector facilities
private sector facilities
mission sector facilities
50
40
36
30
31
20
10
3
4
0
Global Fund Apr-06
grant start date
(02/2006)
Jul-06
Oct-06
Jan-07
Constituency Building
• Presentations & posters at
~40 meetings
• Brochure & quarterly bulletin
• Monitor supplement & articles
• Synthesis reports
• WHA 2006 briefing & paper
• Publications: Bulletin, Lancet
• Analysis of MDG Target 8.E
BUT……Are these the best policies for
improving access to affordable medicines???
Our current challenge: what are the most
effective policy actions in different contexts?
WHO/HAI and international pricing policy experts are
developing guidelines on options for policies affecting
medicine prices and their impact in various settings:
- mapping current policies & interventions
- commissioning policy review papers
- drafting policy briefs
- identifying research needs