SEVERAL EXISTING MECHANISMS by which low prices are achieved for essential drugs, vaccines and other health commodities in developing countries were presented at the workshop. Several manufacturers already independently offer heavily discounted prices and donations to certain poor countries for selected drugs. Experiences with both patented and non-patented products presented at the workshop show that reductions of 90 percent or more below developed country prices can be possible through bulk purchasing, competitive tenders and skilful negotiation. A participating generic manufacturer noted that it too implements a policy of price reductions for poor countries. It was said that an important body of available experience had been built up, and that this had happened through a combination of volume purchasing, corporate responsibility and market forces.

Table 1 - Contraceptive price reductions through UNFPA procurement practices

* Example of third-generation oral contraceptive

Source: Presentation by Mr. C. Saunders

Global bulk purchasing schemes exist which are able to offer prices to developing countries well below those in industrialized countries. UNFPA, the largest public sector purchaser of contraceptives, obtains reductions of up to 99 percent of the US market price for some contraceptives and sells at a standard low price to developing countries (see Table 1).

UNICEF’s supply division also obtains major price reductions through large volume purchasing. In addition to volume purchasing, competitive bidding and direct negotiation with suppliers for long term agreements were identified as routes to lower prices. The point was made that, for manufacturers, this has sometimes opened access to markets which were not previously considered, and enhances their public image through concessionary pricing.

Regional bulk purchasing funds such as that of the Gulf Cooperation Council, and ACAME (African Association of Central Medical Stores) have also negotiated price reductions of up to 30 percent on some drugs.

Several company initiatives involving individual companies (acting independently of each other) negotiating discounts on a product-by-product and country-by-country basis have also led to lower prices. More recently, some of these initiatives have been opened to groups of countries, rather than applied on a country-by-country basis. The representative of one company described how the anti-malarial product Coartem/Riamet was planned from early in its product life to be packaged, branded, registered and priced differently in low and high-income markets. The point was made that this product may anticipate some important steps which companies can take to prevent backflow of products from low to high-income markets. Several examples of corporate donations were presented, with some involving open ended commitments in terms of time and quantities.

Amongst the points made about experience with the above programmes, in particular donations, was that their success depended importantly on effective partnership with the public authorities, political will on their part, the availability of dependable local distribution and health care systems and the education of providers and patients. It was noted that the rate of uptake of the drugs offered at substantially lower prices or free of cost was sometimes low, reflecting factors such as the lack of adequate financing, constraints of health system capacity, lack of up-to-date information on such offers or under-utilisation of the private sector or NGO delivery systems.

The merits and demerits of donations were the subject of some discussion. One view was that donations suffer from the disadvantage that they are not always sustainable or generally available and could come with conditions which might reflect an imbalance of negotiating power between donors and recipients. Another view was that in situations where even a low price is too high, donations are to be preferred where possible and that the notion that donations are unacceptable because they reflect an imbalance of power, if carried to its logical conclusion, would rule out philanthropic activity in general. More general views were also exchanged on the issue of conditionalities. There were differences of view about the extent to which conditions are attached to existing programmes, for example for HIV/AIDS drugs. It was suggested that, if any conditions are to be attached to the supply of differentially-priced products, they should be minimal and worked out openly with the participation of all stake-holders.

Among the factors that were mentioned as influencing the extent to which reduced prices can be obtained under existing programmes are the volume, duration and standardization of purchases, the patent status of the product, its importance in high-income markets, competitive pressure on the supply side, the buyer’s monopsony power, the use of transparent, competitive and corruption-free procurement procedures, negotiating expertise, and the existence of technical or legal obstacles to trade diversion. It was observed that these presentations showed that more widespread and sustainable differential pricing is economically, legally, and technically feasible with the right mix of consistent and mutually supportive strategies.