Use of External Reference Pricing for medicines
One option to manage or regulate medicine prices is External Reference Pricing (ERP) which is increasingly being used worldwide. ERP is the practice of using the price(s) of a pharmaceutical product in one or several countries in order to derive a benchmark or reference price for the purposes of setting or negotiating the price of the product in a given country.
In 2011 WHO and HAI published an in-depth review on the use of ERP (click here). We found little evidence on the effects of ERP either for the country that applies it, or the countries being referenced to.
In 2014, HAI and the authors of the review mapped the use of ERP, in particular which countries do not use ERP, which countries use ERP, the structure and processes used, and which low- and lower-middle income countries are being referenced to by more wealthy nations.
The map above shows what we found. When you put the cursor on a country using ERP, it shows which countries it references to and which countries reference to it.
A report of this mapping work will be available shortly. Note: neither HAI nor the authors endorse the use of ERP over other options to manage medicine prices.
WHO/HAI pricing policy briefs now published
Policy-makers and others have tremendous opportunities to improve medicine availability and affordability for their citizens. Various pricing policies and strategies exist, however, it’s challenging to determine which to implement. All have strengths and weaknesses, just as all countries have unique medicine needs and challenges. Each country must assess its own medicines situation and implement different combinations of policies and interventions.
To help policy-makers, HAI and WHO have published five in-depth reviews on various pricing policies (as listed in the right hand column and on the ‘policy’ page). Now, we are pleased to announce the release of an additional review on the role of health technology assessment in medicine pricing and reimbursement, along with six concise policy briefs which contain key points of each in-depth review.
The reviews and briefs, which stem from systematic literature reviews and analyses of policy issues and options, do not recommend one medicines policy or intervention over another. Instead, they offer an objective description of the advantages and disadvantages of each. They also discuss other important considerations that policy-makers should assess when developing pricing and related policies.
Spotlight on China
The massive bribery scandal involving GSK, and investigations of bribery involving Sanofi, has drawn media attention to medicine prices in China.
Four medicine price and availability surveys, using the WHO/HAI methodology, have been undertaken in China:
Click on the year to access the survey reports or journal article. You can access the data for the Shaanxi, Shanghai and Shandong surveys by going to http://www.haiweb.org/MedPriceDatabase/
Findings from the most recent Shaanxi Province survey show that:
- Government procurement of medicine is inefficient – for a number of medicines they were buying high priced originator brands as well as lower priced generics.
- Patients were paying more for originator brands in the public sector facilities than in private pharmacies. For lowest priced generics, patient prices in the public sector were lower than in the private sector. Similar or high public sector prices compared to private sector prices has been a common finding of the four China price surveys.
- In the public sector, originator brands were priced at 640% more than lowest priced generics. In private pharmacies originator brands were 137% more than lowest priced generics.
- Availability of medicines in the public and private sectors, for originator brands and generics, was very poor.
It is clear that China needs to improve its policies and practices so that medicines are more efficiently procured, are more available in facilities, and are more affordable especially for those on low incomes. The focus must be on the promotion and use of quality-assured lower priced generics – not high priced originator brands. As well, China must strengthen regulations on unethical and inappropriate drug promotion, with sanctions on drug companies, doctors and others who offer and accept bribes and other inducements to prescribe products.
Access two recent media articles:
China steps up its scrutiny of western drug prices, Financial Times 11 August 2013
China begins probe into Sanofi whistleblower’s bribery claim, Financial Times 11 August 2013
Prices and availability of ACTs and other anti-malarials in Sierra Leone
PLOS One journal recently published a 2009 study of the price, availability and affordability of ACTs and other anti-malarials in Sierra Leone. The methodology used was adapted from the WHO/HAI methodology. Data was collected from a total of 127 facilities (public, private and NGO sectors) across 6 of the 14 districts of the country. Key findings included over 95% availability in the public sector outlets of first-line AS+AQ for the treatment of uncomplicated malaria (where it was generally dispensed free-of-charge). Chloroquine was not found in any of the public sector outlets, highlighting its successful ban in this sector, however it was available in 70% of private pharmacies. 83% of the more rural retailers stocked non-policy anti-malarials, which were offered at a much lower price than ACTs. The authors concluded that the widespread availability of ACTs in the public sector can be expected to discourage the sale of monotherapies, counterfeit and substandard anti-malarials by the private sector but effective measures are needed to strengthen the drug distribution system to control the widespread availability of banned chloroquine in the private sector in particular, and to counter the lack of availability and high cost of policy anti-malarials in the private sector, which undermines the anti-malarial market.
Click here to access the journal article
Study shows UNRWA medicine procurement prices are efficient but some improvements are needed in the procurement process
In 2011 Margaret Ewen from HAI and Maisa Al Sakit, an independent consultant from Jordan, assessed medicine procurement processes and prices in the UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). Analysis of the data showed procurement responsibilities are well defined, procedures are followed and central procurement adheres to UNRWA’s formulary. But the criteria and processes for prequalifying suppliers were not clearly defined, there were few requirements for testing product quality, quantification was not based on need, and awarded prices were not reported or shared with bidders. Overall, UNRWA’s central procurement prices did not differ from reference prices i.e. Management Sciences for Health’s International Drug Price Indicator Guide, and awarded tenders from Jordan’s Joint Procurement Department and the Gulf Cooperation Council. The recommendations of the authors included the establishment of regulatory standards for supplier prequalification and product quality assurance, and the publishing of awarded tender prices to increase competition and transparency.
Click here to access the abstract of this study published by The Lancet, 8 October 2012
Click here to access the abstract in Word
Click here to access the full report
UN reports little improvement in the availability and affordability of essential medicines
Based on findings from medicine price and availability surveys from 2007-2011, the 2012 UN MDG Gap Task Force reports little improvement in recent years in the availability and affordability of essential medicines in developing countries. On average, the availability of generic medicines was 51.8% in public sector medicine outlets and 68.5% in private pharmacies, with some countries having significantly lower availability. Overall patient prices of lowest priced generics in the private sector were about five times the international reference prices, with some countries over ten times. The UN concluded that obtaining essential medicines, especially for the treatment of chronic diseases, remains prohibitive for low-income families in developing countries.
Click here to access the report
Click here to access the press release
Literature review on the impact of generics policies in LMICs
As part of the WHO/HAI review of generics policies (in progress), Warren Kaplan, Veronika Wirtz and others reviewed the literature - published from 2000 to 2010 - on the impact of policies to enhance use of generics in low and middle income countries (LMICs). They found only 10 evaluations of the impact of competition, trade, pricing and prescribing policies on generic medicine prices and/or volume. Key barriers to implementing generics policies in LMICs were negative perceptions (eg generics are lower quality), perverse incentives for retailers to sell products with the highest profit margin, absence of regulations permitting generic substitution, and lack of price transparency. Despite limited evidence, the authors concluded that prerequisites for increasing the use of generics were a functioning regulatory authority, a robust generics market, and aligning incentives for doctors, consumers and retailers.
Click here to access the paper in Health Policy
New survey data published: Haiti, Russia (Tatarstan Province) and India (New Delhi)
Data from three new medicine price and availability surveys have recently been added to the database:
Haiti, August 2011
Price and availability data was collected in four sectors (public, private, NGO and a mixed sector) across all 11 provinces of the country. Mean availability was poor at 20% in the public sector, 37% in the private sector and 23% in both the NGO and mixed sectors (generics). Patient prices were particularly high in the public and private sectors at 4.77 and 7.25 times international reference prices respectively for lowest priced generics. While the availability of originator brands in the private sector was low at 5%, they were very high priced (median price 35 times IRP) and unaffordable for those on low wages. Even some lowest priced generics were unaffordable e.g. the lowest paid government worker would have to work 5.3 days to pay for 30 days’ supply of phenytoin for epilepsy. Recommendations included adopting and disseminating the national Essential Medicine List (and ensuring the availability of medicines on this list in public sector facilities), and assessing the supply chain to identify areas where regulations are needed to make medicines more affordable.
Tatarstan, Russia, February 2011
Click here to access the survey report
In this survey data was collected on 95 medicines (predominantly for CV disease) in the public and private sector of 5 regions in Tatarstan province in Russia. Mean availability was good at 89% in the public sector and 75% in the private sector (generics). Government procurement prices were very high at 12.32 and 2.92 times international reference prices (IRP) for originator brands and lowest-priced generics respectively. Patients paid slightly less in public sector facilities (but still at high prices). In private pharmacies patients paid 12.56 and 3.98 times IRP for originator brands and lowest-priced generics respectively. No survey report is currently available.
Delhi, India, July 2011
Data was collected in the public and private sectors in all 8 districts of NCT, Delhi. Mean availability of EML medicines in the public sector (where medicines are free-of-charge) was 48.8%. Overall government procurement prices were reasonable but prices were highly variable for some medicines across the 5 agencies procuring medicines showing procurement could be more efficient. Private sector patient prices ranged from 44% below international reference prices (IRP) to 1500% for individual medicines. Median prices for lowest priced generics were 2.83 times IRPs. Trade schemes between the manufacturer, wholesaler and retailer, such as ‘buy 10 and get 2 free’, were found for 3 of the 7 medicines in the analysis, retail mark-ups were higher than established mark-ups, and 5% VAT is applied to medicines. Policy options recommended by the author include reviewing how manufacturers set the maximum retail price and transparency of procurement prices across agencies.
Click here to access the survey report
Medicines for Non-Communicable Diseases: Within our Grasp but Out-of-Reach
Reliable, accessible, potentially cheap and effective treatments with generic medicines for the majority of non-communicable diseases (NCDs) such as cardiovascular disease, diabetes and asthma are within our grasp. But low availability, and high prices of originator brands and even some lowest-priced generics, put them out-of-reach of the majority of the world’s poor. HAI calls on delegates at the UN High Level Meeting on NCDs on 19/20 September 2011 in New York to refocus on the attainable goal of universal access to essential medicines as a core priority for the treatment of NCDs. Donors need to recognise the paucity of support for essential medicines initiatives, globally, regionally and nationally, such as those by WHO, civil society and governments. In the longer term, donors should consider scaling-up support to establish a Global Fund for Essential Medicines for Non-Communicable Diseases that promotes universal access to low-priced generic medicines of assured quality.
Click here to read HAI's briefing note on access to medicines for non-communicable diseases