Application of an International Reference Price List to National Medicines Procurement Tenders

Bada Pharasi, Gavin Steel, Jean-Pierre Sallet,SPS, Management Sciences for Health

South Africa has the largest ARV program in the world, yet had been purchasing ARVs at prices much higher than the average international prices for most ARVs

In 2010 4,8 million people were tested for HIV as part of the HCT campaign; Of these, 905,000 were found to be HIV positive

The treatment program would be unsustainable if prices remained at such high levels

Background

Background

Ministerial Task Team on Medicines Procurement in the country’s public sector conducted a comparison of national prices of ARVs with international prices

The preliminary results indicated that there would, indeed, be merit in going the route of international benchmarking

The Team made a distinction between what is referred to as “the catalogue price” and the “landed” cost

International price comparison of ARVs

Background – outcome of the international price comparison

The greatest price difference appeared to be for efavirenz, the most widely used ARV in South Africa at the time, followed by tenofovir

The use of Tenofovir was to increase significantly following adoption of the new treatment guidelines

Massive potential savings were predicted if just these two products were procured on the international market

Objectives

To reduce costs by improving competition among bidders through international benchmarking and publication of international reference price lists

during the tender process for ARVs

Design

Analysis of tender prices was performed to evaluate the potential impact of this intervention

Confounders were controlled for by analyzing the impact of the number of bidders and the exchange rate

Intervention A reference price list was compiled based on

international transactional prices and introduced as a stimulus for competition among local suppliers during the national ARV procurement process

Results – the ARV tender prices announced by Health Minister in December 2010. Some of the key products:

Product 2008 Price

2010 Price

% Price Reduction

Efavirenz 600mg tablet $13.99 $5.74 59%

Lamivudine 150mg tablet

$13.99 $2.67 39%

Nevirapine 200mg tablet

$4.12 $3.37 27%

Tenofovir 300mg $20.34 $8.03 65%

Results – discussion of findings

A 53,1% reduction in the cost of the total ARV tender was achieved – a (R4,7 billion) $0,62billion savings

The percentage decrease in the cost of each item ranges from 4% to 81%

The saving allows the state to double the number of patients on treatment

Results – The Minister attributed the achievement to the following measures: Ensuring that there are an adequate number of products

registered with the regulatory authority Encouraging all potential suppliers, including

international suppliers, to participate Publication of a reference price list based on

international transactional prices Requiring suppliers to provide a breakdown of their cost

components Monitoring of price changes through the life cycle of the

tender

Results – TB tender prices

RIFAMPICIN 150mg, ETHAMBUTOL HCl 275mg, ISONIAZID 75mg and PYRAZINAMIDE 400mg tablet (56s)

RIFAMPICIN 150mg, ETHAMBUTOL HCl 275mg, ISONIAZID 75mg and PYRAZINAMIDE 400mg tablet (112s)

RIFAMPICIN 150mg, and ISONIAZID 75mg tablet (84s)

RIFAMPICIN 300mg, and ISONIAZID 150mg tablet (56s)

CAPREOMYCIN 1g injection, 10ml vial

ETHIONAMIDE 250mg tablet (84s)

$- $10.00 $20.00 $30.00

$5.32

$8.35

$4.56

$3.59

$11.05

$16.28

$5.41

$8.51

$5.50

$4.36

$15.19

$24.63

TB Tender Price Changes (2011 vs. 2009)

2009 Contract price 2011 Contract Price

The average reduction in price was 13%

Average price reduction taking inflation into account – 19.3%

The prices of 20 items reduced, 2 increased and 2 remained the same

Based on bid estimates, the saving would be $10.04m, which could treat an additional 312,000 adults

The tender price was on average 118% of the reference price, with 7 items higher, 17 lower and 1 the same as the reference price

Results – TB tender prices

Conclusion

The application of international reference lists during national tenders is a valuable tool for achieving optimal pricing

South Africa has traditionally sourced virtually all of its pharmaceutical requirements from local and international companies represented in the country, but recent experiences have demonstrated that resorting to international benchmarking and opening the market to international suppliers has increased competition and allowed for reduced prices