Price Considerations for TB Drugs

Goals of Effective Procurement Selecting appropriate medicines Meeting required quality standards In right quantities Delivered in a t imely manner At lowest possible purchase price

Price Ranges The cost of the necessary medicines for a short-course regimen of 6–8 months is between USD 10 and USD 40 for first-line regimens.

Impact of Hidden Costs on Total Cost

Factors influencing Price - 1 Buyer –Reliable/prompt payment history of buyer –Competition –Long term agreements –Standardization –Accurate forecasting

Factors influencing price - 2 Manufacturer –Quality –Packaging/Product Information –Additional services –Product inputs affected by global markets –Market entrance Depending on IncoTerms and shipment method - unit product price will increase to include risk of loss and cost and insurance for shipment, security system, quality control during shipment, distance, weight of product, other Profit - for new innovator products much higher to recoup some of the development costs outlined above; for generic products not so high because are recouping cost of production & testing

Factors influencing price - 3 Supplier –unit price has to do with supplier acquisition, handling and IncoTerm decisions –no product development necessary - therefore no added cost –get better acquisition price from manufacturer or other supplier if ordering in bigger quantities (economies of scale) –must pay staffs to procure and manage inventories –must train staffs –must pay for real estate (storage facility) –must add cost for shipment, insurance, delivery, as appropriate with contract

Factors influencing price – 4.0 Procuring Institutions –Institution (MoH, other) determines (quantifies) its needs for individual drugs –Does a price comparison to determine “market prices.” –Decides on special markings such as embossing on tablet or packaging to indicate a MoH product, or special colours, packaging such as FDCs, patient kits, blisters, etc –Reviews in-country supply system to remember capacity for receiving, delivery system and frequency needed for distribution to various health system levels, size of warehouses/storerooms at different levels

Factors influencing price – 4.1 Procuring Institutions –Based the above aspects the procuring institution will tender based on the following options; each option would of course affect the procurement price: Quantities to order - higher price if ordering fewer products (economies of scale) Little or no capacity for most of the above aspects if centralized system or if procurement and supply system is decentralized - highest price since supplier may need to decrease delivery quantities at a given time, ship to port, pay handler to pass through customs, assure quality during delivery, cover in-country transportation costs, maintain documentation system for all activities Capacity to receive order, clear through port, store large quantities at central level and adequate in-country delivery system - price not so high but country is paying for real estate, staffs, vehicles and managers to carry out the in-country activities