MARGARET EWEN

M. Ewen

AT a recent workshop in the Netherlands, a Ministry of Health official from a developing country stated that medicines were unaffordable in her country, and she asked what could be done about it. She voiced what data from most pilot surveys using the WHO/HAI methodology showed, and what people in her country will have known all their lives: medicines are generally unaffordable in developing countries and that price matters. Thankfully for the millions of people in the world dying because they lack drugs, governments have many options to lower prices.

Before deciding on what price policy options to take, it is essential to gather evidence to identify the principal causes of high prices. The WHO/HAI survey (working draft) can be used to systematically, reliably and regularly monitor what people have to pay for medicines. It has been designed to answer the following important questions:

• what prices do people pay for a selection of key medicines?

• how affordable are these medicines for ordinary people?

• do the prices, availability and affordability of the same medicines vary in different sectors and in different parts of the country?

• what is the difference in prices of originator brands and generically equivalent medicines?

• how do procurement prices compare with international reference prices and with local retail prices?

• what taxes and duties are levied on medicines, and what is the level of various mark-ups which contribute to their retail prices?

• how do prices, affordability and 'add-on' costs compare internationally?

Once these questions are answered, it becomes clearer what mix of policies are needed to make medicines affordable.

In developing the methodology, nine pilot surveys were conducted. From the synthesis of results, some policy messages are evident. Governments and others need to implement pricing policies that:

Increase the availability and use of generics

The pilot studies showed some staggering brand premiums, that is, the difference between the originator brand and lowest price generic equivalent. Brand premiums in Kenyan retail pharmacies were found to be as high as 40 for furosemide (i.e. the originator brand was 40 times more expensive than the lowest price generic equivalent), 8.6 for diclofenac, 8.5 for ibuprofen, 7 for am-itriptyline and 5.6 for co-trimoxazole paediatric suspension. In Sri Lanka, brand premiums in retail pharmacies were 24 for omeprazole, 9 for captopril and 7 for amitriptyline.

Generic equivalent medicines need to be available in all sectors to offer the choice of cheaper medicines. High brand premiums are an issue when generics are not available, the medicine is under patent or the pharmacist sells the brand to maximise profits. In these situations, policy options include:

• for least developed countries (until 2016) and countries not yet compliant with TRIPS or where the medicine is not patented: purchase from cheaper sources;

• for countries already compliant with TRIPS and where the medicine is patented: use the legal flexibilities of TRIPS (e.g. compulsory licensing) to introduce generics;

• facilitate quick penetration of generics when the patent is about to expire e.g. fast tracking generic applications;

• permit generic substitution, encourage generic prescribing, and educate health professional and consumers on the availability and acceptability of generics;

• have a remuneration policy of dispensing fees and fixed margins rather than unregulated or progressive mark-ups to favour generic products.

Use standard treatment guidelines

In South Africa's private sector, a switch in ulcer treatment from originator brand omeprazole to generic ranitidine would reduce the number of days the lowest paid government worker had to work to pay for a month's therapy from 8.6 days to 4.7 days. This example illustrates the value of linking price and affordability data, policy permitting generic substitution and the use of standard treatment guidelines. Education would be key in implementation.

Remove all taxes on essential medicines

Governments in some countries are taxing the sick by applying high import duties and taxes, and adding 'value-added' or 'goods and services' taxes e.g. in Peru import duties of 12% are applied as well as 18 % value added tax (VAT); in Armenia 20% VAT is added. If governments are serious about making medicines more affordable for their citizens, they must remove all taxes on essential medicines.

Monitor prices and price components - including prices in other countries

The data shows vastly different prices can be paid for the same product in different countries e.g. the retail price for originator brand furosemide (Lasix®) in Kenya was 29 times the Sri Lankan price. This illustrates the need for careful evaluation of the manufacturer's price. But 'add-on' costs, as the product goes through the distribution chain, also need close attention. In the pilot surveys, most of the add-on costs were applied as percentage mark-ups (some unregulated). On top of already high manufacturers' prices, this results in even higher prices for patients. Governments need to monitor both the manufacturers' prices and price components then decide the best way to deal with excessive charging at any stage - either by promoting competition or regulation.

Data gathering at the Cairo workshop on using the survey tools (see details on p.24)

Photo: HAI

Further studies planned

While the survey will provide data, it does not identify the causes. During late 2003 and 2004, HAI and WHO will be conducting a number of national in-depth studies to determine the local causes of high prices and unexplained price variations, and to identify and prepare suitable lines of response. In-depth studies under consideration include:

• a multi-country assessment of price components and manufacturers' prices (brand/generic, patent/off patent);

• monitoring medicine prices in a sentinel group of Sri Lankan pharmacies following pharmaceutical market deregulation;

• focused studies of HIV/AIDS medication - not only monitoring price and availability of medicines in this therapeutic group but also the impact of local programmes (Global Fund, Accelerated Access Initiative, differential pricing programmes etc.) on the prices people pay for medicines;

• assessing how sensitive people are to price i.e. household behaviour in response to medicine prices and availability;

• assessing the impact of negotiations and pooled procurement on prices. Results will indicate potential savings by better practice by drug purchasing agencies.

In addition to these studies, WHO and HAI will conduct studies to validate the survey method. We intend looking in greater detail at issues such as sample size, price fluctuations, market share, the effect of choice of generic on price, pack size etc.

Regional workshops

To assist investigators, workshops on using the survey tool are planned for Asia/Pacific (early April 2004 in Bangkok), Africa (Francophone and Anglophone), Latin America and Central/Eastern Europe and Newly Independent States (funding permitting). Dates and venues will be posted on E-drug, the electronic discussion group.

The first workshop was held in Cairo in mid-October 2003 with participants from 12 countries in the region and from various sectors - government, NGO and academia. All felt that the workshop was worthwhile in understanding the survey method. In the coming months we expect a number of surveys to be conducted in the region. The data will be published on HAI's web site.

As the project continues in 2003 and 2004, experiences using the survey tool will be shared and it is expected a revised edition of the manual will be published in late 2004.

Please contact Margaret Ewen at HAI Europe (marg@haiweb.org) or Andrew Creese at WHO EDM (creesea@who.int) if you wish to conduct a medicine price survey.