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Medicine price and availability surveys – methodology essentials – policy options

Richard Laing

Department of Essential Medicines and Pharmaceutical Policies World Health Organization

Geneva, October 2013

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Presentation Outline:

1. Overview of WHO/HAI Project on Medicine Prices and Availability

2. WHO/HAI survey methodology for measuring medicine prices, availability and affordability

3. What have we learned about medicine prices and availability? Selected results from WHO/HAI surveys

4. Evidence to policy: what can be done?5. Monitoring pricing policies

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Overview of WHO/HAI Project on Medicine Prices and Availability

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Wider problem of medicine prices

• Medicines have variable and often high prices

• Medicines are the largest health expense for poorer households and are a and a major burden on government budgets

• Some evidence that prices for some key medicines are unrelated to countries’ income level

• Burden falls directly on most patients in developing countries – but little was known about the prices people pay and how prices are set

• The prices of medicines are well above their production costs so there is great scope for reductions

• For medicines to be affordable, appropriate and well-informed price policies are needed - but many developing countries do not have price policies

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• Outcome of the WHO/public interest NGOs Roundtable on Pharmaceuticals

Objectives• To develop and apply a reliable methodology for

collecting and analysing price and availability data across healthcare sectors and regions in a country

• To promote price transparency: survey data is made freely accessible on the HAI website, allowing international comparisons

• To provide guidance on pricing policy options and monitor their impact

The WHO/Health Action International Project on Medicine Prices and Availability

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• Facility-based survey that measures:o medicine priceso medicine availability o affordability of treatmentso components in the supply chain

• Launched at the World Health Assembly 2003• Survey data publicly available on HAI web site•Second edition includes:o adjustments to methodologyo practical advice based on prior surveys o additional tools and resourceso new guidance on international comparisons, o policy options, advocacy and regular monitoring

WHO/HAI standard methodology for measuring medicine prices and

availability

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Questions that can be answered by the survey:

• What prices do people pay for key medicines?

• Does the price & availability of the same medicines vary across different sectors or regions of the country?

• What is the difference in price and availability of originator brands and lowest price generic equivalents?

• How do government procurement prices compare with patient prices in the public sector?

• How do national prices compare with international reference prices?

• How affordable are treatments for low paid people?

• What does the manufacturer’s price, taxes, mark-ups and other charges contribute to the final patient price?

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Over 70 medicine price and availability surveys to date using WHO/HAI methodology

Survey tools, data, reports & more: www.haiweb.org/medicineprices

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WHO/HAI survey methodology for measuring medicine prices, availability and affordability

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What data are collected?

• The availability and price of selected medicines in different sectors:

Publicsector

Privatesector

OtherSector:

OtherSector:

Price to the patient

Availability to patients

Affordability by patients

Procurement price

• The add-on costs of medicines as they move through the supply chain, from manufacturer to patient

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Where is data collected?

• Data is collected in 6 regions of the country ("survey areas")– Area 1 = capital city– 5 other regions within 1 days’ travel

of capital, randomly selected

• In each survey area, data is collected from a sample of medicine outlets in up to 4 sectors: – public sector (e.g. hospitals, health

centres)– private sector (e.g. licensed

pharmacies, licensed drug stores)– Up to 2 "other" sectors (e.g. mission

hospitals)

Plus, government procurement data (collected centrally)

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Sampling frame

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Which 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– e.g. Lisinopril 10mg cap/tab 30-pack

• For each medicine, two products are surveyed:

1. Originator brand – original pharmaceutical product that was first authorized for marketing, normally as a patented product • Always has a brand name• Identified centrally before data collection, does not vary from outlet to outlet

2. Lowest-priced generic (LPG) – products other that the originator brand that contain the same active ingredient (substance), whether marketed under another brand name or the generic name• generic with the lowest price found at each medicine outlet• LPG product will therefore vary from outlet to outlet

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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)

During medicine outlet visits, data are recorded on hard copy Medicine Prices Data Collection forms

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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How are data analyzed?

Availability: % of outlets where medicine was found on the day of data collection

Price: median local prices expressed as ratio to international reference prices

Medicine Price Ratio (MPR) = median local unit price International reference unit price

– e.g. MPR = 2 means that the local medicine price is 2 x the international reference price

– MSH international reference prices used: recent procurement prices offered by not-for-profit suppliers to developing countries for multi-source generic equivalent products.

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? Based on the median local price of a medicine prescribed at a standard dose

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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

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Price Components

• Identified by tracking 5-7 tracer medicines backwards through the supply chain, from the patient price to the manufacturer’s selling price/CIF price

• Method also involves interviews with pharmacists, wholesalers, importers, Ministry of Health, Ministry of Trade, Customs office, local manufacturers….

• Price components are analysed by cumulative per cent mark-up and per cent contribution to the final price

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What have we learned about medicine prices and availability?

Selected results from WHO/HAI surveys

Source A Cameron, M Ewen et al, The Lancet online 1 Dec2008

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

India

(n= 7)

low

income

(n= 15)

lower-

middle

income

(n= 9)

upper-

middle

income

(n= 2)

India

(n= 7)

low

income

(n= 17)

lower-

middle

income

(n= 11)

upper-

middle

income

(n= 2)

India

(n= 7)

low

income

(n= 17)

lower-

middle

income

(n= 11)

upper-

middle

income

(n= 3)

public sectorgenerics

private sectorgenerics

private sectororiginator brands

max

min

mean

Median % availability by World Bank income group

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Ratio of government procurement prices to MSH international reference prices, lowest priced generics

0.78

5.37

2.94

1.36

0.270.09

0.33

0.90

0.47

1.17

1.45

1.17

0

1

2

3

4

5

6

India (n=7)

low income

countries(n=16)

lower middle income countries

(n=12)

upper middle income countries (n=3)

max

min

mean

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

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Ratio of private sector patient prices to MSH international reference prices

0

10

20

30

40

50

60

70

80

90

lowincome:

India(n=7)

other lowincome(n=17)

lower-middleincome(n=16)

uppermiddle-income(n=3)

lowincome:

India(n=7)

other lowincome(n=17)

lower-middleincome(n=16)

uppermiddle-income(n=3)

Med

MP

R

Originator brands Lowest priced generics

13.8

29.4

35.940.9

141

Adjusted CPI & PPP

9.612.6 10.5 11

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100.0%

55.9%

337.7%350.2%

265.3%

167.7%

26.0%

0.0%

147.1%

0.0%

157.4%

6.0%

0%

100%

200%

300%

400%

India(n= 7)

low income(n= 14)

lower-middle income

(n= 12)

upper-middle income

(n= 2)

all countries(n = 35)

max

min

mean

1000.3% 1464.7% 1464.7%

Differences between originator brands & lowest priced generics, matched pairs, private sector

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Affordability: no. of days wages, lowest paid govt. worker,

to buy 7 day course ciprofloxacin 500mg tab twice daily, private sector

0 2 4 6 8 10 12 14 16 18 20

Kuwait

Morocco

El Salvador

Armenia

Jordan

Kazakhstan

Lebanon

Nigeria

Pakistan

United Arab Emirates

Indonesia

Kenya

Philippines

Yemen

Nicaragua

Ukraine

Peru

South Africa**

Fiji*

Thailand*

days' wages

originator brand lowest-priced generic

… 30.8

… 47.6

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Affordability: 30 days supply metformin 500mg 3x/day (diabetes) & captopril 25mg 2x/day (hypertension), lowest priced generics, private sector

0 1 2 3 4 5 6 7 8 9 10

Iran (2007)

Fiji (2004)

United Arab Emirates (2006)

India (2003-2005)

Tunisia (2004)

Yemen (2006)

Indonesia (2004)

Malaysia (2004)

Morocco (2004)

Ukraine (2007)

Syria (2003)

Lebanon (2004)

Peru (2005)

Philippines (2005)

Jordan (2004)

Sudan (2005-2006)

Mongolia (2004)

Pakistan (2004)

Ethiopia (2004)

Kuwait (2004)

Uganda (2004)

Nigeria (2004)

Kenya (2004)

Tanzania (2004)

El Salvador (2006)

days' wages

Metformin 500 mg 3x/day Captopril 25mg 2x/day

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Price components

• Largest contribution to the final patient price varies across countries, sectors, medicines (imported/locally manufactured, originator brand/generic)

• Applied cumulatively so the higher the manufacturer’s selling price the higher the patient price

– private sector: MSP contributes 25% in Pakistan up to >6000% in El Salvador

• Large mark-up on a low priced medicine can result in a lower patient price than a smaller mark-up on a more expensive medicine

• Taxes and other government charges are often applied on medicinese.g. Tajikistan - VAT 20%, customs duty 5%, tax 1-5% Sudan - total govt charges 20% including customs duty 10%,

Ministry of Defence tax 1%, Pharmacy career fee 1% & other charges Peru – VAT 12%, IGV 19%, municipal promotion tax 2%

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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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A low ex-factory price does not necessarily mean a low patient price: high retail mark-ups

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Evidence to policy: what can be done?

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One survey finding – many causes

• Low public sector availability: – lack of resources or under-budgeting– inefficient procurement / distribution– low demand/slow-moving products

• High private sector prices: – high manufacturer’s selling price– high import costs– taxes and tariffs– high mark-ups

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Policy options

• There are many possible causes for high prices, low availability, low affordability, etc.

• There are likely to be many policy options according to differing circumstances

• Need to select the combination of options appropriate to a particular situation

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• 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

– e.g. schemes to make chronic disease medicines available in the private sector at public sector prices

• Prioritized 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 use of generic medicines

– preferential registration procedures, e.g. fast-tracking, lower fees

– ensure the quality of generic products

– permit generic substitution and provide incentives for the dispensing of generics

– educate doctors/consumers on availability and acceptability of generics

Policy options

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I DON’T TAKE CHANCES I ONLY USE ORIGINALS

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• Separate prescribing and dispensing

• Control import, wholesale and/or retail mark-ups through regressive mark-up schemes

• Provide tax exemptions for medicines

• 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.

Policy options

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Must monitor for unintended negative effects

• Price controls may lead to excessive prices when the price is not adjusted to consider changes in the market

• Setting prices too low can discourage production / stocking of a product

• Regulating mark-ups 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)

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Outcomes after price surveys

Lebanon • After MoH survey in 2004, they compared prices of 1,000 products

with Jordan and Saudi Arabia• Policy of fixed mark-ups irrespective of FOB price

(cumulative 71.4%) changed to variable depending on FOB price• Estimated retail price reductions 3-15%

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Kuwait (survey 2004)• June 2005 it was reported that the government would review the 'Kuwaiti-only list'

medicines (about 70 medicines) provided free in the public sector to make them available to non-Kuwaiti citizens

United Arab Emirates (“Price list” survey, 2005)• Government decided to reduce prices by an average of 7–8% through modification

of its procurement practices following price comparisons with other countries.

Indonesia (MoH survey 2004)• June 2006 reported that the government would abolish VAT and import duty on

essential medicines • The pharmaceutical industry association announced that from 1 July 2006 it would

reduce the price of 100 branded generic medicines, containing 34 active substances.

Malaysia (survey, 2005)• June 2006 it was reported that the government would cap the price of more than

1000 essential medicines

Outcomes (cont’d)

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East African Community: • 10% cut on import duties on medicines.

Mali: • Adoption of new regulations for enforcement of a fixed

mark-up for approximately 100 essential medicines in the private sector.

• A pricing monitoring system has been set up by the Ministry of Health for private pharmacies.

Nigeria: • Director of Pharmaceutical services in Lagos State, has

mandated responsible officers for drug procurement to ensure reduction in medicines prices – a medicine prices policy is being developed.

Outcomes (cont’d)

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Monitoring pricing policies

Monitoring pricing policies

• Pricing and availability of medicines may be influenced by a number of factors– E.g. Pricing policies, health policies/decisions, supply

issues, financing, exchange rates

• Pricing policies may have unexpected (negative) effects or no effect

• Monitoring of medicine prices and availability can help to detect the effect of these factors and adapt policies and interventions to address them

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Kenya: increased financing and differential pricing have increased the availability of

Artemether/lumefantrine 20/120 mg

3 4

91

7276

86 86

31

36

5861

68

0

10

20

30

40

50

60

70

80

90

100

Apr-06 Jul-06 Oct-06 Jan-07

% a

vai

lab

ility

public sector facilities

private sector facilities

mission sector facilities

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Country Pricing intervention Outcome

China Regulated distribution mark-ups

enforced

Created incentive to use higher

cost medicines

Honduras Mark-up regulation introduced Led to higher prices as suppliers

over-invoiced to recover margin

Jordan Removed price controls

including mark-ups on 50 OTC

medicines

Prices increased and controls

were re-imposed

South Africa 0% mark-up on hospital

medicines introduced

Drop in price index of 1000

medicines

Based on table in ‘Working Paper 3: The regulation of mark-ups in the pharmaceutical supply chain’.

Why monitor medicine prices and policies?

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Conclusion

• Medicine pricing and availability survey– Establishes evidence– Can develop locally-directed policies

• Policy options– Various policy options exist– Develop combination appropriate to situation– Not just price

• Don’t forget availability, quality, use