Decrease in Prices of Antiretroviral Drugs for Developing Countries: From Political “Philanthropy” to Regulated Markets?
(2003; 44 pages)


This paper gives some economic background about recent debates on the feasibility of introducing a “differential pricing” for HIV/AIDS drugs in favour of developing countries. It presents the methodology and the main results of research carried out for the ANRS ETAPSUD programme on determinants of source prices of antiretroviral (ARV) drugs in Brazil and 13 African countries (see page 207) during the period 1998-2002. Analysis of 1,030 observed transactions reveals a declining price trend for antiretroviral (ARV) drugs which is nearly linear between 1997-2000, with an accelerated decrease for the year 2001, followed by a more limited decrease in 2002. This trend corresponds to a significant reduction in price differences between brand drugs and generic substitutes and between countries. It also shows a relationship between higher volumes per transaction and lower prices that has, however, tended to diminish in the last few years.

Econometric analysis, using multiple linear regression, shows that the following factors were associated with price increases: ARV drugs belonging to the more recent classes, such as protease inhibitors (PIs), existence of patent protection for the drug at country level, higher HIV prevalence, national guidelines recommending PI drugs for first-intention treatment, and intervention of intermediary wholesalers in the transaction. On the other hand, transactions in countries with organised public programmes for ARV delivery and in countries which participated in the Accelerated Access Initiative (AAI), the partnership that was launched in 2001 between UN organisations and six brand-name major pharmaceutical companies, were associated with lower prices. However, even after adjustment for these factors, the introduction of generic competition remains an essential factor for price decreases. Indeed, while countries like Brazil, Nigeria and Malawi have always carried out competitive negotiations with multiple suppliers including generic manufacturers, most African countries in our sample have evolved toward a “hybrid” mechanism of procurement that combines negotiations in the AAI international framework with national tenders or other procurement mechanisms introducing generic competition.

The main policy recommendation that emerges from the study is that excessive reliance on “corporate philanthropy” and international bargaining between UN organisations and the major brand-name manufacturers will not guarantee the long term sustainability of the lower differential pricing of ARV drugs that has de facto been established in some African countries since the year 2001, and its extension to a greater number of countries and to a greater number of drugs that are needed, in addition to ARVs, for HIV-infected patients. The buyer-size effect, that could be obtained through globalisation of purchases of HIV/AIDS drugs between several countries, will only translate into price decreases to the extent that buyers have the power to substitute between multiple suppliers. To achieve the recommendation recently adopted by the Global Fund to Fight AIDS, Tuberculosis and Malaria that countries should purchase quality-controlled HIV/AIDS drugs at the minimum cost, decentralised negotiations, extended market competition to all potential drug suppliers, and regulatory flexibility (in international agreements, and in national legislation) towards local production and imports of generic drugs are essential.

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