Medicine prices: a WHO/Health Action International collaboration The 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?

3 Purpose

4 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

5 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

6 “Core” list of drugs for price comparison

7 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:

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

10 Captopril - ratios to international reference prices

11 Furosemide - ratios to international reference prices

12 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

13 Originator brand premiums - median of all medicines surveyed in retail pharmacies, 7 countries MEDIAN INNOVATOR BRAND PREMIUM

14 OVERALL BRAND PREMIUMS: branded median/unbranded median Germany 1.08 Italy 1.34 France 1.39 United Kingdom 2.52 Kyrgyzstan 2.60 Czech Republic 2.67 Poland 3.23 Russia 3.33 Tajikistan 8.33 Source: Tafuri, Creese, Reggi (forthcoming)

15 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

16 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

17  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

18 Initial results (2) International differences in originator brand prices – Furosemide Lasix® (Celltech)Celltech

19 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!)

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

21 Price components (total markup as % CIF price)

22 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

23 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

24 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

25 Manufacturers’ selling price in public sector MPRs for public sector procurement – all medicines surveyed

26 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

27 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

28 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

29 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

30 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!!

31 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.

32 What next? Check the HAI web site: 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?