Generating%20reliable%20evidence:%20measuring%20medicine%20prices%20and%20availability

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• Generating reliable evidence measuring medicine
  prices and availability
• Dr Richard Laing
• Department of Essential Medicines and
  Pharmaceutical Policy
• World Health Organization
• (laingr_at_who.int)

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WHO/HAI Project on Medicine Prices Availability

• improve the availability and
• affordability essential medicines
• Outcome of the WHO/public interest NGOs
  Roundtable on Pharmaceuticals
• 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

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WHO/HAI standard methodology

• Survey tool to measure
• medicine prices
• medicine availability
• affordability of treatments
• components in the supply chain
• Launched at the World Health Assembly 2003
• Survey data publicly available on HAI web site
• Over 50 surveys conducted to date
• Second edition includes
• adjustments to methodology
• practical advice based on prior surveys
• and additional tools and resources
• new guidance on international comparisons,
• policy options, advocacy and regular monitoring

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How are data collected?

• Data on the price and availability of medicines
  are obtained by data collectors during visits to
  "medicine outlets"
• Medicine outlets are places where medicines are
  dispensed to patients (e.g. pharmacies, health
  centres)
• Data on government procurement prices are also
  collected
• During medicine outlet visits, data are recorded
  on hard copy Medicine Prices Data Collection
  forms
• Medicine price components are also identified by
  tracking medicines through the supply chain and
  identifying add-on costs
• At the end of fieldwork, all completed forms are
  entered into the electronic survey Workbook by
  data entry personnel
• Data are entered twice and checked for errors
• The Workbook automatically generates analyses of
  the survey data

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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
• Originator brand (OB)
• Lowest-priced generic (LPG)

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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
• 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?

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Price Components

• The add-on costs that are applied 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
• The amount of charge is often variable depending
  on whether the medicine is
• Imported or locally manufactured
• Innovator brand or generic
• Sold in the public or private sector
• Crucial to understanding why prices are high and
  what policy options can be considered
• An integral part of the Medicine Prices survey

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Median availability by World Bank income group
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Government procurement prices for lowest priced
generics
MPR 1
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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

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Patient prices vs. procurement price (LPG)
public sector
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Patient prices in the private sectormedian of
Median Price Ratios, by WHO region
n6
n5
n8
n9
n5
n5
n11
n11
n1
n2
n9
n9
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in 9 of the 10 countries, it would take 5 or more
days salary to pay for the medicines every month
Affordability of medicines - for lowest priced
generic
Senegal 7 days
Cameroon 40 days
an asthmatic child with a respiratory
infection, an adult with diabetes and
hypertension and another adult with a peptic ulcer
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Price components

• Largest contribution to the final patient price
  varies across countries, sectors and medicines
  (imported or locally produced, originator brand
  or generic)
• Price components - cumulative effect from
  manufacturers selling price
• Large mark-up on a low priced generic can result
  in a lower final patient price than a small
  mark-up on a high priced product

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Price components private sector

• Multiple 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
  price
• E.G. Pakistan - MSP for locally-produced generic
  amoxicillin represented 78 of the final medicine
  price in the private sector

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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
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Policy options to improve access to affordable
essential medicines

Margaret EwenHealth Action InternationalGlobal
Office, Amsterdam
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Examples of policy changes following medicine
price and availability surveys

• Tajikistan
• Abolished 20 VAT on medicines in 2006 - supply
  chain add-on costs should decrease from 122 to
  85 for imported medicines
• Lebanon
• 2004 - procurement price of 1100 imported
  medicines reduced by 20-30
• 2005 - regressive margins for importers,
  wholesalers, retailers estimated price
  reductions of 3-15
• Currently reviewing all prices gt1000 medicines
  reduced by ave. 14
• Retail prices and pharmacy margins published on a
  public website prices published in Lebanon
  National Drug Index
• Indonesia
• Reduced public sector prices of 458 products by
  5-70 and required procurement prices to be
  standardized for all public purchasing in the
  country

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Examples of work in progress

• Kuwait
• Govt. announced that Kuwaiti-only list of 70
  medicines would be free to non-nationals in the
  public sector
• Indonesia
• Ministry of Health advocated for abolishing of
  VAT
• Pharmaceutical industry association announced in
  mid-2006 it would reduce the price of 100 branded
  generic medicines (34 active substances) to max 3
  times the price of true generics has not
  happened for all products
• Jordan
• Ministry of Health advocated for abolishing 4
  sales tax
• Amending the pricing criteria, permit generic
  substitution, include an outpatient
  pharmaceutical benefit in new insurance scheme
• Tanzania
• New 10 tax on most imported medicines

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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 public sector prices
• govts applying excessive mark-ups on procurement
  price eg Chad 300, Khartoum 600
• inefficient procurement so facilities buying from
  private wholesalers
• High private sector prices
• high manufacturers selling price
• high import costs
• Taxes and tariffs eg Peru VAT 12, IGV 19,
  municipal promotion tax 2 Sudan 1 Ministry of
  Defence duty, 1 pharmacy career fee other govt
  charges totalling 20
• high mark-ups eg importer 10-61, wholesaler
  2-65, pharmacy 8-300

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Multiple 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 expensive 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 and encourgae generic substitution
  provide incentives for the dispensing of low
  priced generics
• educate doctors/consumers on availability and
  acceptability of generics

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I DONT TAKE CHANCES I ONLY USE ORIGINALS
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Policy options (cont'd)

• Separate prescribing and dispensing
• Control import, wholesale and/or retail mark-ups
  through regressive mark-up schemes for pharmacy
  consider dispensing fee
• Tax exemptions for medicines pass on govt.
  procurement prices to patients
• 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.

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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
• Printing maximum retail price on the packet can
  result in all prices at maximum level
• Regulating mark-ups with percentages 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)
• Dont want to discourage production/stocking of a
  product

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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

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Interested?

• HAI website www.haiweb.org/medicineprices

Database of survey results Survey
reports Analyses Bulletins and more
Contact Marg Ewen, HAI Global
marg_at_haiweb.org