2. Differential pricing of pharmaceuticals:
What about the rest of the world?
Danielle Lang, Suzanne Hill

3. Access to medicines Recent literature focuses on:
Least developed countries;
Countries with HIV/AIDS; and
Impact of TRIPS on developing countries.
Methods proposed to improve access:
Drug donations; and
Differential pricing.

4. Aims and objectives
Systematic review of the literature on the differential pricing of medicines:
What is meant by differential pricing;
Extent of use of differential pricing;
Limitations to its implementation;
Different mechanisms to achieve differential pricing; and
How wider adoption might be achieved.

5. Methods Search of the published literature:
Medline, Embase, Cochrane, EconLit;
Differential/tiered/equity/preferential/ discriminatory pricing or prices of pharmaceuticals/medicines/drugs.
Manual searching of references in retrieved papers.
Search of key organisations’ websites (eg WHO, MSF, Oxfam).

6. Results Published literature search (N=169):
152 excluded
17 included
Manual searching of references:
21 additional papers included
Grey literature search:
43 additional papers included
Total number of papers included: 81
Empirical studies: 2

7. Key lessons General support for differential pricing:
WHO, WTO, MSF, Oxfam, UK, EU
Differential pricing can be good for everyone:
Cheaper drugs and improved access for low-income countries;
Increased market share for companies;
No price increases for high-income countries; and
Consistent with international trade agreements.

8. Key lessons Differential pricing is consistent with economic theory.
Drugs have low marginal costs and high fixed costs;
Market segmentation and price discrimination open up large (previously ignored) markets; and
Low profit margins in developing countries outweighed by high sales.

9. Example Vaccines and contraceptives:
Prices 1-5% of developed country prices have been negotiated;
Millions have gained access;
Pharmaceutical companies have increased their sales; and
Re-importation to wealthier markets has been prevented.

10. Implications
To improve access to medicines, differential pricing needs to be the ‘operational norm’:
Inclusive of all countries; and
Inclusive of all medicines.
“We would expect that middle-income countries would generally pay more than the low-income countries, but less than the rich countries.” [CMH, 2001]

11. Future research
How to achieve differential pricing as the ‘operational norm’.
Possible alternatives:
Voluntary discounts by companies;
Negotiation between governments and companies;
Increasing generic competition (voluntary or compulsory licensing);
Global/regional bulk purchasing; or
Global differential pricing system.

12. Future research How to set fair, affordable differential prices.
Agreement on the principles of differential pricing is easy; agreement on pricing mechanism is much harder.
Possible alternatives:
Marginal cost of production (plus profit?);
Target price as % of high-income prices;
Ramsey pricing (pricing proportional to the inverse of the elasticity of demand); and
Cost-effectiveness analysis.

13. Value-for-money ACE-I prices
Country
GDP/capita (US dollars)
Value-for-money (monthly) price
In-country (monthly) prices
India
$461
$0.17
$0.25 – $0.38
Philippines
$1 031
$0.38
$7.90 – $26.67
Bulgaria
$1 512
$0.55
$0.98 – $41.06
South Africa
$3 112
$1.14
$0.45 – $26.85
Italy
$19 097
$6.98
$10.82 – $22.31
Australia
$20 511
$7.49
$9.05 – $13.03 UK
$23 529
$8.60
$10.38 – $47.43
Germany
$25 610
$9.36
$12.30 – $60.50
USA
$31 880
$11.65
$60.33 – $111.87
Denmark
$32 906
$12.02
$2.83 – $13.12
Lopert R, et al. Lancet 2002; 359:

14. Future research Impact of differential pricing: Drug prices;
Access to medicines; and
Financial implications for:
Manufacturers;
Low-income countries;
Middle-income countries; and
High-income countries.