Tiered pricing - the concept of selling drugs and vaccines in
developing countries at prices systematically lower than in industrialized countries - has received widespread
support from industry, policymakers, civil society, and academics as a way to improve access to medicines for the
poor. We carried out case studies based on a review of international drug price developments for antiretrovirals,
artemisinin combination therapies, drug-resistant tuberculosis medicines, liposomal amphotericin B (for visceral
leishmaniasis), and pneumococcal vaccines.
We found several critical shortcomings to tiered pricing: it is
inferior to competition for achieving the lowest sustainable prices; it often involves arbitrary divisions between markets
and/or countries, which can lead to very high prices for middle-income markets; and it leaves a disproportionate
amount of decision-making power in the hands of sellers vis-à-vis consumers. In many developing countries,
resources are often stretched so tight that affordability can only be approached by selling medicines at or near the cost of
production. Policies that “de-link” the financing of R&D from the price of medicines merit further attention, since
they can reward innovation while exploiting robust competition in production to generate the lowest sustainable
prices. However, in special cases - such as when market volumes are very small or multi-source production capacity
is lacking - tiered pricing may offer the only practical option to meet short-term needs for access to a
product. In such cases, steps should be taken to ensure affordability and availability in the longer-term.
To ensure access to medicines for populations in need, alternate
strategies should be explored that harness the power of competition, avoid arbitrary market segmentation, and/or
recognize government responsibilities. Competition should generally be the default option for
achieving affordability, as it has proven superior to tiered pricing for reliably achieving the lowest sustainable prices.