International Strategies for Tropical Disease Treatments - Experiences with Praziquantel - EDM Research Series No. 026
(1998; 113 pages) View the PDF document
Table of Contents
View the documentAbstract
View the documentAcknowledgments
View the documentInformation on authors
View the documentExchange rates used in the report
Open this folder and view contentsChapter 1: Policies for praziquantel*
Open this folder and view contentsChapter 2: Bayer & E. Merck: Discovery and development of praziquantel*
Open this folder and view contentsChapter 3: Shin Poong Pharmaceutical Co.: Process development in the Republic of Korea*
Open this folder and view contentsChapter 4: The Egyptian International Pharmaceutical Industries Co.: Praziquantel formulation*
Open this folder and view contentsChapter 5: The international supply of praziquantel*
Open this folder and view contentsChapter 6: Demand for praziquantel and national distribution*
Close this folderChapter 7: Prices and production costs of praziquantel*
View the documentThe price of praziquantel
View the documentProduction costs and pricing strategies of major producers
View the documentReferences
View the documentOther documents in the DAP Research Series
View the documentDAP Research Series No. 26
 

The price of praziquantel

Market segmentation and price reductions

This study of global prices for praziquantel in the 1980s and 1990s identified two striking features: a) a sharp segmentation of the international market, based on price; and b) a significant decline in prices in the 15 years since the product’s introduction on the international market.

Price segmentation can be observed across four dimensions: the prices of praziquantel in the veterinary and human markets; the prices of the human formulations in developed and developing country markets; the prices provided to bulk purchasers versus smaller buyers; and the prices in the public and private sectors in developing countries. The price structure of praziquantel from highest to lowest prices paid, in general, is as follows:

• private market in developed countries,
• veterinary market in developed countries,
• insurance market in developed countries,
• private market in developing countries,
• generics market, and
• tender market for governments and institutions.

Producers seek to set the price in each market segment according to the price level that buyers in the segment are expected to bear. For example, because the veterinary market for praziquantel is confined primarily to the developed world (except for the veterinary market in China), the prices of veterinary formulations tend to be higher than the prices in the insurance market for the human formulations. Similarly, the tender market prices for developing countries tend to be much lower than the prices charged in the private market, either in the developed or developing world.

The second feature of praziquantel prices is their significant decline, globally, over time - although not necessarily at the same rate in each market segment. As mentioned in Chapter 5, the price of praziquantel has fallen continuously in most market segments since the product’s introduction in 1978-except for branded products in the developed country market segment (illustrated by the German market). The process of declining prices has been accentuated in the 1990s by the expiry of the Bayer-E. Merck patent between 1989 and 1994 (see Chapter 2), and by the increase in the number of generic manufacturers and greater price competition.

Both the price segmentation of the market and the differential price declines in these segments reflect a strategic effort on the producers’ part to maximize overall profits from the different market segments. Producers seek to protect higher prices in more profitable market segments, but are still willing to participate in more competitive market segments, especially if they have the potential for large volume sales.

These two features of the praziquantel market (market segmentation and price declines) are discussed below in more detail.

Producer and supplier prices

This research project made considerable effort to obtain information on praziquantel prices. Questionnaires were mailed to producers, suppliers, and purchasers of praziquantel that we could identify, and the mailings followed up through telephone calls and in-person interviews when feasible. Library searches were undertaken for published material on the prices of praziquantel. Various databases were searched for praziquantel price-related information.

In general, we experienced great difficulty in obtaining accurate and reliable price data on praziquantel, due to three main factors: (1) the lack of public databases related to pharmaceutical products and prices; (2) the lack of good private databases on pharmaceutical products and prices in developing country markets; and (3) the reluctance of producers, suppliers, and purchasers to disclose price-related information, which was accentuated by the increasingly competitive nature of the praziquantel market. Still, our research yielded some information on changes in the prices for praziquantel between 1981 and 1994 in several market segments, and differences in the prices across market segments. Figure 7.1 provides a summary of these price changes for the major producers and suppliers of praziquantel.


Figure 7.1 Praziquantel Price Changes (1980-95)

Prices are for a single 600 mg tablet of praziquantel, converted into dollars. Developed country prices are German retail prices for Biltricide. Developing country prices are for Biltricide and Distocide in Korea and for Biltricide in Egypt. Concessionary prices (international agency) are purchase prices for WHO and UNICEF. Concessionary prices (NGO) are sales prices for a single German NGO.

Figure 7.1 shows that prices for praziquantel have dropped significantly in most market segments since the drug’s introduction. When the product was introduced by Bayer in 1978, it was priced at approximately US$ 6.50 a tablet in Germany in the private retail market (Scrip, 1981). Also in 1981, Bayer was selling the drug to WHO at a concessionary price of about US$ 0.90 a tablet (Scrip, 1981). Since then, the price has fallen substantially in the private market in most developing countries. Similarly, the concessionary price has dropped as well.

The drop in prices in the private market in developing countries has also been substantial. In the Republic of Korea, when Shin Poong entered the praziquantel market in 1983, Bayer was selling the drug at US$ 4.83 a tablet (see Chapter 3). By 1994, in an attempt to compete with Shin Poong, Bayer had dropped its price in the Republic of Korea to US$ 3.20 per tablet-a price lower than Shin Poong’s in the Korean market (Chapter 3). Shin Poong’s entry into the market, thus, had a dramatic impact on the price of praziquantel in the Republic of Korea. Similarly, in Egypt, the entry of EIPICO forced Bayer to drop its price from L.E. 4 per tablet in 1983 to L.E. 2.24 per tablet in 1994, reflecting an almost 50% drop in local currency-and a nearly seven-fold price reduction in dollars (from US$ 4.44 in 1983 to US$ 0.66 in 1994) due to the devaluation of the Egyptian pound. Bayer was also beaten out of the public market by EIPICO, which was able to win the MOH tender at a price of 88 piasters (US$ 0.26), in 1992 and 1993 (see Chapter 4).

In the market for bulk sales to international agencies, the price at which Bayer was willing to sell praziquantel to WHO in 1994 was US$ 0.42-a greater than 50% drop from its original concessional price. But Bayer is in a poor position to compete in the tender market because of its high production costs (described in the next section), and because other producers have been able to offer even lower prices to international agencies. For example, Shin Poong sold praziquantel to WHO and to UNICEF in 1994 at a price of US$ 0.21-0.22, while producers like Medochemie and IDA were offering prices of US$ 0.14 and lower to WHO.

Figure 7.1 also demonstrates the differential pricing used by producers in the different human market segments. As early as 1981, Bayer sold praziquantel to international agencies at 1/7th its private market price (Scrip, 1981). Similarly, in 1994, Shin Poong was pricing the product at US$ 3.53 per tablet (nominal price) in the Korean private market, and was selling to international agencies at about 6% of that price (Chapter 3). A similar market segmentation is reflected in the prices of praziquantel in developed and developing countries. While Bayer currently sells praziquantel in the USA for between US$ 10-19.50 a tablet in retail pharmacies (depending on the volume of purchase), its price in the Republic of Korea is US$ 3.20 per tablet (nominal price) (Chapter 3).

The purchase volume, which forms the basis for bulk discounts offered by producers, determines to a significant extent the differences in the prices at which praziquantel is sold in developing country markets. For example, in 1994, UNICEF, because of its large volume purchases, obtained prices (US$ 0.22/tablet) significantly below those offered to Ministries of Health in developing countries, even below the tender price in Egypt where EIPICO won a bid to supply the Ministry at a price of US$ 0.26 per tablet.

An added consideration, which probably explains the difference in price in the developed and developing country markets, is the purchasing power of the country, and the ability of an individual market segment to sustain a particular price.

The strategy of producers to provide differential pricing across countries raises important issues related to the possibility of trans-shipment of products from lower priced to higher priced countries. Although we were not able to obtain a completely satisfactory explanation for the absence (or at least the relatively low level) of such secondary markets, it seems that factors related to transport costs, and possibly some quality considerations, may have a role.

Along with a reduction in producer prices, there exists a declining trend in prices from international agencies and private suppliers to developing countries. The declines in the sales prices from bulk suppliers can be explained by the drop in manufacturers prices, and the increasing competition among private distributors and suppliers.

For example, WHO was initially selling praziquantel to developing countries at a price close to US$ 1 per tablet in 1981 (Scrip, 1981). This price dropped to about US$ 0.51 in 1992 (MSH, 1993). The current price is probably closer to US$ 0.20-0.25. Similarly, the UNICEF sale price has dropped from US$ 0.65 in 1985 to US$ 0.29 in 1992 and US$ 0.27 in 1993.

Among private suppliers, a similar fall in the sales price of praziquantel is observed over time. This price decline is shown in time-series data obtained from Action Medeor, and in data collected by Management Sciences for Health for other private suppliers. These data are presented in Tables 7.1 and 7.2 below.

Table 7.1: Price Changes of praziquantel sold by Action Medeor

Year

Price (DM)

Percent change
from previous

Exchange rate
(DM = US$ 1)

Price (US$)

1983

4.8

0

2.6

1.85

1984

4.8

0

2.8

1.71

1985 (Jan)

4.8

0

2.9

1.66

1985 (Feb)

3.06

-36%

2.9

1.06

1986

1.4

-54%

2.2

0.64

1987

1.4

0

1.8

0.78

1988

1.4

0

1.8

0.78

1989

1.4

0

1.9

0.74

1990

1.4

0

1.6

0.88

1991

1.41

+1%

1.7

0.83

1992 (Jan)

1.42

+1%

1.6

0.89

1992 (Feb)

1.24

-13%

1.6

0.76

1993

0.42

-66%

1.7

0.25

1994

0.42

0

1.6

0.26

1995

0.36

-14%

1.45

0.25

Note: These are sales prices from Medeor; from 1983 to 1992 the product was obtained from Bayer and E. Merck; from 1993 on, from generic producers.

Source: Action Medeor, Germany.

In addition to demonstrating the decline in the price of praziquantel over time, Table 7.1 illustrates the impact of two significant events in the market history of praziquantel: the entry of Shin Poong in the international market (in 1985); and the expiry of the Bayer/E. Merck patent in many countries, resulting in a dramatic increase in the number of generic producers (in 1992-1993). These two events were accompanied by sharp cuts in the price of praziquantel by the existing manufacturers, in response to the increased competition, and by a corresponding decrease in the sales price of suppliers. Thus, in February 1985 (roughly corresponding with the entry of Shin Poong in the praziquantel market), Medeor’s sales price dropped sharply by 36% in the course of a month, and in 1986 fell again by a further 54%. Following this period of rapid price cuts, prices tended to stabilize for the next 6 years. In 1992 and 1993 (corresponding with the expiry of the Bayer/E. Merck patent in many countries), Medeor’s praziquantel prices once again fell sharply, by 13% and 66%, respectively.

Table 7.2: Price changes of praziquantel sold in concessional market by private suppliers


Price (US$) per tablet and (% change from previous year)

Private supplier

1989

1990

1991

1992

1993

1994

1995

IDA

0.62

0.59
(-4.8%)

0.60
(+1.7%)

0.49
(-18.3%)

0.38
(-22.4%)

0.30
(-21.1%)

0.15
(-50.0%)

IAPS

-

-

-

-

-

0.34

0.17
(-50.0%)

ECHO

0.85

0.70
(-17.6%)

0.87
(24.3%)

0.59
(-32.2%)

0.41
(-30.5%)

0.34
(-17.1%)

0.19
(-44.1%)

ORBI

-

-

0.91

0.57
(-38.5%)

0.52
(-8.8%)

0.34
(-34.6%)

0.26
(-23.5%)

INMED

0.71

-

-

-

0.61
(-14.1%)

0.61
(0%)

N/A

Note: Suppliers are listed in Table 7.3 according to price level for 1995, with the lowest first, and highest last.

Source: Management Sciences for Health, 1989-1995.

Table 7.2 shows that IDA, the largest of the private suppliers, was selling praziquantel at US$ 0.62 in 1989, and dropped its price to US$ 0.15 by 1995 (MSH, 1995). Similar drops in the sales prices are also observed for all the other suppliers of praziquantel. These data show that supplier prices dropped sharply after 1992 (similar to the pattern of Table 7.1), suggesting a causal link between the fall in the price of praziquantel and the expiry of the Bayer/E. Merck patent. In 1995, the price quoted by these private agencies for the supply of praziquantel to developing countries and relief agencies ranged from a low of US$ 0.15 per tablet (from IDA) to a high of US$ 0.26 per tablet (from ORBI), just below UNICEF’s price of US$ 0.28 per tablet. However, even with these suppliers, the quoted price can reportedly be negotiated downwards, depending on the size of the order, the company from which the drug is procured, and the size of the package (e.g. 8-tablet, 100-tablet, 1000-tablet packs) that is being purchased (MSH, 1994).

Prices in individual countries

A notable feature of the price of praziquantel across countries is the markedly higher prices charged by producers for praziquantel in the developed world as shown in Figure 7.1. While the prices in the developed nations do vary by country and market segment, they tend to be much higher than the prices in developing countries. As explained above, this phenomenon is explained by the market segmentation strategy of producers.

Thus, in 1993, the price in the private market for the Bayer product was US$ 9.02 per tablet in Japan, US$ 5.95 per tablet in Taiwan, US$ 4.61 in Austria, US$ 3.97 per tablet in France, and US$ 2.17 in Australia. These are to be contrasted with the price for the same product in the private markets in the developing world, where they ranged from US$ 0.57 in Egypt to US$ 1.82 in Jordan, and US$ 2.11 in francophone Africa.

In developing countries, the public sector’s procurement price of praziquantel tends to be 25-50% below the retail price in the private market, depending on the effectiveness of the tender process in the public sector, and on whether the brand of praziquantel sold in the private sector is produced by a domestic or foreign source. For example, in Egypt, the procurement price in the public sector in 1994 was about US$ 0.26, while the retail price in the private market varied from US$ 0.51 (EIPICO) to US$ 0.57 (Bayer). Public sector stocks diverted to the black market tend to be sold at a price between the public sector procurement price and the private sector retail prices. It is difficult, however, to estimate the size of the black market.

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