WHO/Health Action International Project on Medicine Prices Margaret Ewen, HAI Europe Background and purpose of the project Technical approach to measuring medicine prices Some results and observations Policy options Next steps

Wider problems of medicine prices Medicines have variable and generally high prices, and are unaffordable for large sectors of the global population and a major burden on government budgets Some evidence that retail prices can be higher in low income countries than in high income settings Medicine prices are rising more rapidly than other prices Burden falls directly on most patients in low income countries Trade regulations can severely affect the price and availability of medicines 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

Why measure the price of medicines? Little is known about the prices people pay for medicines and how these prices are set – from the manufacturers’ selling price to the patient price Reliable information is needed in order that more favourable purchasing agreements can be negotiated, domestic distribution better managed and pricing policies monitored Improved price transparency will empower people concerned with health and medicines policy

Background to WHO/HAI project on medicine prices Absence of a standard methodology has been a stumbling block in reliable monitoring and price comparison within countries Practical difficulties in obtaining reliable, up-to-date information on medicine prices Methodological difficulties in making international price comparisons WHO-Public Interest NGO Roundtable was an opportunity to launch an initiative on medicine prices

Purpose: Phase I To promote analysis of medicines affordability, price differences within countries and what makes up the retail price in order to lower prices and improve access to essential medicines To develop a simple and reliable methodology for collecting and analysing retail medicine prices To make data freely accessible on a web site so international price comparisons are possible

Designed to inform on What prices people pay for key medicines? How affordable are medicines for ordinary people? Do the prices & availability of the same medicines vary in different sectors? Do prices of the same medicine vary in different parts of the country? What is the difference in prices of originator brands and generically equivalent medicines? How do procurement prices compare with international reference prices and with local retail prices? What taxes and duties are levied on medicines and what is the level of various mark-ups which contribute to their retail prices?

Survey tool – technical basis Systematic sampling of medicine outlets in at least 4 areas, minimum of 10 pharmacies per area Prices of 30 pre-selected commonly used medicines in at least public and private sectors Predetermined dose forms & strengths, & recommended pack sizes Supplementary lists encouraged, adapted to local needs Originator brand and generic (most sold & lowest price) prices sampled Local prices compared to international reference prices All components of price from manufacturer to retailer identified Affordability assessed for ten pre-selected courses of treatment Excel workbook, for data entry and analysis, accompanies manual

Core list of medicines for price comparison

Progress Published draft manual at WHA 2003 HAI web site: Phase II: - support country surveys -validate method -in-depth price studies Some results from the pilot studies……

Affordability – days’ wages, lowest paid unskilled govt. worker, needed to buy 30 days’ ulcer treatment with omeprazole

Affordability - days’ wages, lowest paid unskilled govt. worker, needed to buy 30 days’ ulcer treatment with ranitidine

Affordability and Sector Comparison - days wages needed to pay treatment, Peru Brand – Private pharmacy Generic – Private pharmacy Generic – Public sector One month’s therapy - glibenclamide 4.4 days2.1days0.9 days One month’s therapy - ranitidine 7.9 days2.2 days1.3 days

Affordability Not only is the originator brand unaffordable in many countries, but sometimes even the generic is unaffordable Usually generics are cheaper, and needed in all sectors to offer the choice of more affordable medicines Affordability could be improved through: -availability of generics in the public sector -therapeutic selection

Brand versus generic median price ratios ciprofloxacin 500mg tabs, private pharmacies

captopril 25mg tabs, retail pharmacies median price ratio

amoxicillin 250mg, retail pharmacies median price ratio

These 3 examples show 1.Some huge differences within countries between originator brands and generics prices: ”brand premiums” Is this a problem? YES where: –the generic equivalent is not available –the medicine is patented and faces no competition –the brand is sold to increase profits

2. Some huge differences within countries between brand & generic prices and the international reference price 3. The wide variation in retail price between some brands across countries

Example of retail price variations for the same product – furosemide 40mg, Lasix ® (preliminary)

Manufacturers selling price and local ‘add-ons’ - furosemide 40mg, Lasix ®

Price components - total markup as % CIF price

Availability and median price ratios (approx.) Philippines, retail pharmacies BrandGeneric atenolol58% (57)16% (22) ceftriaxone inj55% (14)5% (12) diclofenac75% (20)38% (7) captopril82% (16)19% (10)

Availability issues For several medicines, the availability of expensive originator brands was high while the availability of cheaper generic equivalents was low. Some cases: - no generics found for newer medicines not under patent e.g. ciprofloxacin in Cameroon and Philippines - no generics found for older products e.g. beclometasone inhaler in Philippines

A few other observations from North African surveys Poor availability of generics Tunisia: regulated market, found some high prices Lebanon: least regulated but comparable prices Many noted higher than expected mark-ups Mali & Chad – higher prices than others, but poorer countries

Policy issues (1): brand premiums - do they matter? In the public sector originator brand premiums may not be an issue if just one generic equiv. medicine is available Brand premiums are an issue where –the generic medicine is not available in public sector and therefore has to be purchased from private sector –the medicine is patented and therefore faces no competition –Brand products sold to maximise profits

Policy options to reduce originator brand premiums  For LDCs (until 2016) 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

 Governments to facilitate quick penetration of generics when patent is about to expire: - fast tracking generic applications - use Bolar exceptions Generic policy on: - prescribing - substitution - consumer education on availability and acceptability of generics Change remuneration policy to dispensing fees and degressive margins

Policy issues (2): manufacturers’ prices of originator brands may 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 Policy options to correct it: –Goverment to establish price regulation - from manufacturers’ selling price to wholesale &retail mark-ups and/or profesional fees –Routinely perform international price comparisons and price surveys –Make available, and stimulate use of, equivalent generics when possible (if cheaper)

Policy issue (3): price components ‘ add-ons’ - do they matter? 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 and adding VAT/GST e.g. in Peru, 12% import tax and 18% VATare added as most of add-ons are applied as percentages, the higher the starting price, the higher the price to the patient while it is essential in the surveys to evaluate the add- ons, it is equally important to know the manufacturers’ prices

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

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

Policy issue (4): Procurement efficiency 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

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 the manufacturers’ selling price

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 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

Areas for improving the approach More systematic approach to components is needed to get close to manufacturers’ selling prices in many settings – new method now being piloted 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 core medicines: the selected ones may not reflect national therapeutic usage. Our core list has few single-source (recent) medicines

Next steps Phase II: - support country surveys -validate method -in-depth price studies -revise manual

Support national or provincial surveys of medicine prices using the survey tool  Workshops - regional - Middle East, North Africa, Asia Pacific, India, NIS, Africa - national training workshop – Uganda  Providing technical support -predominantly on-line -in-country

Surveys: planning, underway or completed Lebanon, Jordan, Kuwait, Syria, Sudan, Tunisia, Algeria, Morocco, Mali, Chad, Uganda, South Africa, Tanzania, Kenya, Ethiopia, Zimbabwe, Nigeria, Ghana, Pakistan, Indonesia, Vietnam, Philippines, Malaysia, Fiji, China (Shangdong), India - West Bengal, Haryana, Karnataka, Nagpur, & Maharashtra (2), Mongolia, Kazakhstan, Tajikistan, Kyrgyzstan, Uzbekistan. 36 surveys in 31 countries (in addition to 10 pilot surveys)

In-depth studies of pricing issues Multi-country assessments of: the manufacturer’s selling price for a selection of medicines using the new components handbook prices of HIV/AIDS drugs procured through different programmes the type, extent and impact of discounting and rebates causes of high prices and gross price variations – national case studies development & piloting of a monitoring tool

Validation studies Sampling: the current sampling method in the manual will be tested to see if it produces reliable national estimates. This study will involve an expansion of the facilities sampled to more remote locations. Products: prices and availability of all versions of some medicines (including all generics) will be examined. Variation: statistical analysis of all surveys to measure the range of variation between regions and between facilities, to determine the reliability and appropriateness of the samples

Pack prices: study looking at variations in pack prices will be undertaken Reference source: MSH is current default. A study will be undertaken comparing median price ratios using different reference price databases. Actual prices: surrogate patient study to compare survey prices with what people actually pay

What WHO & HAI will be doing in 2004/5… Get current surveys finished, data checked and on HAI web site (5 post-survey workshops to be held) In-depth and validation work completed Manual revised New Workshops in 2005: francophone Africa, Latin America, Balkans, Asia Plan and fundraise Phase III Lobby – national and global levels