Ellen ‘t Hoen, MSF Oslo 8-11April WHO-WTO Workshop Differential Pricing 1 Differential Pricing:...

Oslo 8-11April WHO-WTO Workshop Differential Pricing

1Ellen ‘t Hoen, MSF

Differential Pricing: Concepts and Issues

----Affordable Medicines for

Developing Countries

Ellen ‘t Hoen

Médecins sans Frontières

Access to Essential Medicines Campaign

www.accessmed-msf.org



Factors Affecting Access to Essential Medicines

R&D

Production

Approval

Quality

Distribution

Drug information, rationale use

Diagnosis/prescription/monitoring

Price

Compliance

Pharmacovigilance



Global Pharmaceutical Market 2002 $406 billion

Source www.ims-global.com/insight/report/global/report.htm

1.3%

5%

Market projected to

grow 7.8% annually



Strategies for Lowering Drug Prices

• Differential/tiered pricing (market segmentation) by big pharma

• Local production under voluntary licensing agreements

• Global procurement and distribution system

• Increased competitiveness in the pharmaceutical market



Differential/tiered Pricing • Relies on spontaneous and voluntary lowering of

prices

• Drug firms prefer low volume –high price strategy

• Requires separation of markets

• Comes with strings attached or hidden agendas

• Does not encourage sustainability or self reliance

• Might hamper other, more sustainable approaches



Local Production Under Voluntary Licensing

• Based on voluntary agreements (will??)

• Requires manufacturing capacity agreements should allow for export

• Encourages technology transfer and pharmaceutical industrial development in the South

• Companies: TT requires strong IP protection

• Practice: Voluntary licenses more likely when strong CL system exists



Global Procurement and Distribution System

• Experience and expertise with vaccine procurement exists (UNICEF)

• Might work for specific diseases/ products

• Requires a long term commitment

• Does not solve structural problems

• Might negatively affect local manufacturing capacity

• Regulatory barriers (pre-qualification) and patent barriers in certain countries (exceptions)



Increased competitiveness

• Proven effective

• Encourages sustainable solutions and industrial development

• Requires flexibility in implementation and a pro public health interpretation of the TRIPS Agreement

• Does TRIPS offer enough flexibility?



Cost per capsule or tablet (US $)

2.00

1.31

2.90

1.551.851.72

1.04 0.830.28 0.08

0.51

0

1

2

3

4

5

Indinavir400 mg

Saquinavir200 mg

Lamivudine150 mg

Stavudine40 mg

Zalcitabine0.75 mg

Didanosine100 mg

1996 1997 1998 1999 2000

Competition Is Highly Effective in Reducing Prices

Source = UNAIDS, B. Samb, 2000, quoted in WHO-Health Technology and Pharmaceuticals, Revised Drug Strategy, April 2000

Competition (2 to 6 producers per product)No competition



Generic CompetitionSample AIDS triple-combination: lowest world prices

(stavudine (d4T) + lamivudine (3TC) + nevirapine)

0

2000

4000

6000

8000

10000

12000

Brand

Generic



0

500

1000

1500

2000

2500

3000

July2000

Aug Sept Oct Nov Dec Jan Feb Mar abr-01

US

$ Brand

Generic

Brazil: $2767

Cipla: $800Cipla: $350

Hetero: $347

Brand: $10439

Brand: $931

Brand: $712

…?

…?



Price Development of Hepatitis B VaccineChange in Prices Over Time of Hepatitis B Vaccine (Plasma-Derived and

Recombinant DNA) offered to Developing Countries (lowest prices obtained) from Denise DeRoeck)

0

5

10

15

20

25

30

35

40

1981 1983 1985 1987 1989 1991 1993 1995 1997 1998 1999

US

$ (

FO

B)

plasma-derived rDNA

Merck, then Pasteur sole producers

Indonesia int'l tender & bid ($.95/dose)

Philippines tender (plasma): $.65

Current plasma price (.45-.57/dose)

Merck sole producer of rDNA

Korean firms (Chiel, KGCC) acquire tech. And enter market

Biogen DNA patent expires in most of world

Asian & other producers enter rDNA market; price drops to close to $0.54-0.69/dose

Int'l Hepatitis B Task Force formed (1986)

PAHO's first HBV contract (for rDNA at $0.82/dose)



Recommendations 1/3

• Not one single solution – mix of strategies that are mutually supportive

• Enforceable regulation to encourage equity pricing and prevent parallel re-importation in the EU, north America and Japan

– Example: EU directive on equity pricing that ensures that equitable priced drugs cannot be put on the EU market



Recommendations 2/3

• Global procurement strategies for selected drugs

– Designed to encourage and improve generic production

– Overcome regulatory barriers: need for international pre-qualification activities

– Overcome IP barriers: exceptions for globally procured goods



Recommendations 3/3• Actively encourage competition

– Recognise the role of generic manufacturing

– Support to expand and upgrade generic production in developing countries

– Take away barriers in the regulatory systems

– Encourage technology transfer – targeted at countries that have production capacity

– Encourage voluntary licensing agreements

– Fast track compulsory licensing

• Launch debate on how to reconcile TRIPS requirements with health needs

Ellen ‘t Hoen, MSF

Médecins sans Frontières Access to Essential Medicines Campaign

WWW.ACCESSMED-MSF.ORG

Visit Our Web- Site for additional information

(and to sign the

“DROP THE CASE” petition)

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