paying the price: medicine prices, availability and affordability across the globe alexandra cameron...

Paying the price:

Medicine prices, availabilityand affordability across the globe

Alexandra CameronDepartment of Essential Medicines and Pharmaceutical Policies

World Health Organization

November 2008

Presentation outline

1. International efforts to improve medicine prices2. Generating reliable evidence: how to measure

medicine prices and availability3. 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 productioncosts so there is great scope for reductions

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 Project on Medicine Prices & Availability

• 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

WHO/HAI standard methodology

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 brand2. 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

COUNTRY

Survey area 1

Survey area 2 Survey area 3 Survey area 4 Survey area 5 Survey area 6

5 public outlets5 private outlets

5 "other 1" outlets5 "other 2" outlets

TOTAL: 20



TOTAL: 20



TOTAL: 20



TOTAL: 20



TOTAL: 20



TOTAL: 20

Survey structure

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– Collected through interviews with importers, Ministry of Health,

Ministry of Trade, Customs office, etc.

2. 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 components to final price, Amoxicillin 250mg cap/tab, Private Sector, Imported

Generic

59%

6%

7%

11%

17%0%

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?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

India

(n= 7)

low

income

(n= 15)

lower-

middle

income

(n= 9)

upper-

middle

income

(n= 2)

India

(n= 7)

low

income

(n= 17)

lower-

middle

income

(n= 11)

upper-

middle

income

(n= 2)

India

(n= 7)

low

income

(n= 17)

lower-

middle

income

(n= 11)

upper-

middle

income

(n= 3)

public sectorgenerics

private sectorgenerics

private sectororiginator brands

max

min

mean

Median % availability by World Bank income group

Government procurement prices for lowest priced generics

0.78

5.37

2.94

1.36

0.270.09

0.33

0.90

0.47

1.17

1.45

1.17

0

1

2

3

4

5

6

India (n=7)

low income

countries(n=16)

lower middle income countries

(n=12)

upper middle income countries (n=3)

max

min

mean

MPR = 1

Government procurement prices in 10 African countries

0.8

1.3

0.57

0.95

0.61

0.88

3.29

1.69

0.66 0.71

0

2

4

6

Price (M

PR

)

75th percentile

25th percentile

Median

n= number of medicines

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

2.4

2.2 2.2 2.1 2.12.0

1.4

3.1

2.9

n/a0

1

2

3

C had(n=13)

K enya(n=22)

G hana(n=22)

E thiopia(n=36)

S enegal(n=27)

C ameroon(n=22)

Mali (n=29) Tanzania(n=26)

Nigeria(n=16)

Uganda (*)

n = number of medicines

P rice (MP R )

Patient prices in the private sector:median of Median Price Ratios, by WHO region

0 10 20 30 40 50 60 70

AFR

AMR

EMR

EUR

SEAR

WPR

Median MPR across basket of 15 meds

Lowest priced generic

Originator brand

n=9n=9

n=2n=1

n=11n=11

n=5n=5

n=9n=8

n=5n=6

Patient price in the public and private sector lowest-priced generics, matched pairs of same medicines

9.3

14.9

5.3

3.1

4.0

2.9

4.0 3.9

2.61.8

1.3

7.3

2.12.0

3.5

1.3

3.3

2.4 2.02.9

3.5

00

4

8

12

16

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) (*)

Pri

ce (M

PR

)

P rivate

P ublic

n = number of medicines

Originator brand vs lowest-price generic prices captopril 25mg tabs, private pharmacies

0 5 10 15 20 25

China, Shandong

Kuwait

Peru

Indonesia

Pakistan

India, Maharashtra

Malaysia

Ghana

Kenya

Cameroon

median price ratio


Originator brand

100.0%

55.9%

337.7%350.2%

265.3%

167.7%

26.0%

0.0%

147.1%

0.0%

157.4%

6.0%

0%

100%

200%

300%

400%

India(n= 7)

low income(n= 14)

lower-middle income

(n= 12)

upper-middle income

(n= 2)

all countries(n = 35)

max

min

mean

1000.3% 1464.7% 1464.7%

Differences between originator brands & lowest priced generics, matched pairs, private sector

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)

0 1 2 3 4 5 6 7 8 9

AFR

AMR

EMR

EUR

SEAR

WPR

No. of days' w ages


Originator brand

n=7n=7

n=1

n=7n=11

n=1n=4

n=8n=8

n=3n=4

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

Price components – private sectorMultiple 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 priceE.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

Generic (patient price: 24 RM)

4: Retail 50%

3: Wholesale 3%

2: Landed 7%

1: MSP, CIF 40%

Originator (patient price: 72 RM)

1: MSP, CIF 56%

2: Landed 11%

3: Wholesale 13%

4: Retail 20%

Malaysia: atenolol 50mg tab, private retail pharmaciesMalaysia: atenolol 50mg tab, private retail pharmacies

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

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 lowest-priced 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 DON’T TAKE CHANCES I ONLY USE ORIGINALSI ONLY USE ORIGINALS

• 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.

Policy options (cont'd)

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

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.

Examples of policy changes (cont’d)

Availability of Artemether/lumefantrine 20/120 mg in Kenya

3 4

91

7276

86 86

31

36

5861

68

0

10

20

30

40

50

60

70

80

90

100

Apr-06 Jul-06 Oct-06 Jan-07

% a

va

ila

bil

ity

public sector facilities

private sector facilities

mission sector facilities

Global Fund grant start date (02/2006)

Increased financial support and differential pricing can have a dramatic impact on

medicine availability

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