Literature Review- Price Survey

Background: Recently introduced antipsychotic and antidepressant drugs may have advantages over older drugs but their high cost may be a major limitation to their availability. Anecdotal reports have described large differences between costs for these drugs in the US and other countries. Methods: Physicians and pharmacists from 17 countries in North America and Europe provided information on the acquisition cost to the pharmacist of an average 30-day supply for three newer antipsychotics (clozapine, olanzapine, and risperidone) and five newer antidepressants (fluoxetine, fluvoxamine, paroxetine, sertraline, and nefazodone). Findings: For each of the eight drugs studied, the acquisition cost in the US was higher than in any other country, varying from 1.7 times to 2.9 times higher that the average acquisition cost in all other countries studied. For example, clozapine's acquisition cost was $317 in the US for a one month’s supply compared to an average acquisition cost of $111 in the other countries. In 1996, $2.1 billion would have saved if people in the US could have purchased the eight drugs for the average acquisition costs in the other countries. Compiled by Kirsten Myhr in 2000 as background to the development of 22 Interpretation: All countries studied except the US have national health insurance that may allow them to negotiate lower prices with pharmaceutical companies. Even with negotiated prices, the companies the WHO/HAI methodology for measuring medicine prices Kirsten MYHR, Literature ReviewPrice Survey (2000) ICTSD, WHO and the World Bank Institute Developing a Methodology to Assess the Impact of TRIPs-plus Provisions Affecting Drug Prices 31 July to 1 August 2006 DRAFT NOT FOR CIRCULATION make a reasonable profit, e.g. 20% for all drugs in the UK. By contrast, the profit margin for these same eight drugs in US is estimated to be 42%. Annual 1996 net profits for the six companies about which such information was available were $12.3 billion. This profit margin and the concomitant high prices for these drugs in the US may deny many individuals with severe psychiatric disorders access to the drugs in the study. 17 countries comprising EU, Canada, Mexico, USA. One local community pharmacy in each. Interviewed by pharmacist or physician. Acquisition cost. Relatively new drugs. (probably patented). An average 30-day supply of 8 drugs, if suitable pack size not available, quantities and costs converted to 30 days. Converted to USD using exchange rate on day of collection. Large price differences and even EU drugs more expensive in US. Average Amercian price twice as high as the average of the other countries. Up to 6x higher “A major limitation of this study was obtaining acquisition costs that were representative of a national average and clearly one pharmacy in each of the 17 countries may not represent a reliable national estimate. In some countries as many as four pharmacies were contacted before a pharmacist was found who was willing to disclose the acquisition costs of the study drugs. Nevertheless, the important consideration is the magnitude of the differences in reported acquisition costs between the US and other countries.” Bedsted T, Jørgensen K. Sammenlignende undersøgelse af medisinpriser i 1999 (Comparative study of drug prices in 1999). I. Center for forskning og udvikling på ældreområdet (Centre for research and development in the elderly), University of Copenhagen 28 January 2000. (In Danish) “This comparison of Danish and foreign drug prices is based on price material collected by the Association of pharmaceutical manufacturers in connection with an agreement between the industry and the Ministry of Health, and it gives opportunities for comparing prices of individual products in Denmark and abroad. In the study a price index has been developed for AIP as well as AUP, the latter with and without VAT. The study shows that the Danish price level (for AIP) in 1999 is not high compared to other countries as the number of countries Denmark is compared to having higher prices than Denmark is higher than the number having lower prices. Even if method of calculation differed for a similar study in 1996, the result seems to confirm that the Danish price level relative to foreign countries declined somewhat in this period. The results for AUP shows that when the VAT is included, the Danish prices will be close to the top, but if VAT is removed from all prices, the picture changes substantially and is much more in agreement with the result for AUP. The relatively high Danish VAT thus stands out as an important part of the explanation for the high retail prices.” Calculation of price index for AIP (price to pharmacy) in Denmark and other European countries. An AUP (pharmacy sales price) price index has been constructed based on information on profit margins in pharmacy and VAT in the countries surveyed. Choice of drugs in general: the WHO/HAI methodology for measuring medicine prices Compiled by Kirsten Myhr in 2000 as background to the development of 23 Kirsten MYHR, Literature ReviewPrice Survey (2000) ICTSD, WHO and the World Bank Institute Developing a Methodology to Assess the Impact of TRIPs-plus Provisions Affecting Drug Prices 31 July to 1 August 2006 DRAFT NOT FOR CIRCULATION reasonable assortment each products weight must be related to its importance in the Danish consumption then calculate what the Danish consumer would have to pay in each of the countries surveyed for a basket which in Denmark would cost 100 DAK. for this survey: chose a reasonable number, sufficient to obtain an acceptable coverage, in terms of money, of the consumption. if not available in any of the other countries at all or in the form surveyed: used the regulation of conversion which has been agreed between the government and the manufacturers (the industry's documentation) other problems the value of the price index is to be seen in connection with the price level in the country. This is not always reflected in the calculation of an index where foreign prices, as in this survey, is calculated using current exchange rates. Used the price information collected by the manufacturers as part of the agreement with the Danish government of 1998, and from the assortment covered by the agreement. In addition, supplementary material, mainly from the manufacturers. If products not identical, used calculations agreed upon in the contract of 1998. The general problem of matching is there. Data collected for another purpose and therefore not collected for this study. 1 April 1999. Assortment: (cf. 1996) the most sold drugs: drugs with the largest sale (assortment I): 125 item codes the largest drug within each generic area (ATC 5.) with largest sale (assortment II): 100 item codes Laspeyres’ price index, weight Danish sales data. Not so many products matched, when looking at pack size even fewer (down to 5/100!) Each product weighted relative to its importance in the consumption of drugs in Denmark. A basket which in Denmark costs 100 DAK what would a Danish medicines user have to pay in other countries? Balasubramaniam K. Retail drug prices in the Asia-Pacific region. Hainews 1995; no. 86 December: 1-2, 11-12 and inserted table. 22 commonly used oral drugs in units of 100 in 29 countries. Questionnaire mailed to colleagues. Retail prices from pharmacies. UK prices from BNF Also prices of four common food items. Economic indicators were PPPs and minimum daily wage of unskilled worker. Converted to USD by collector. Some findings: The average price of a basket of six commonly used drugs is about five to seven times more expensive in the Philippines and Indonesia respectively than in India or Nepal. What is most alarming is the finding that the prices which consumers with low purchasing power in developing countries pay for some commonly used drugs are much higher than the prices rich consumers in developed countries pay for the same drugs. Bala K, Lanza O, Kaur SL. Retail drug prices: The law of the jungle. Hainews 1998; no 100 April: 2-4, 13-16 and inserted table. the WHO/HAI methodology for measuring medicine prices Compiled by Kirsten Myhr in 2000 as background to the development of 24 Kirsten MYHR, Literature ReviewPrice Survey (2000) ICTSD, WHO and the World Bank Institute Developing a Methodology to Assess the Impact of TRIPs-plus Provisions Affecting Drug Prices 31 July to 1 August 2006 DRAFT NOT FOR CIRCULATION 21 commonly used drugs in units of 100, oral, in 39 countries. Questionnaire mailed to colleagues. Retail prices from pharmacies. Also price of four common food items. Economic indicators were PPPs and minimum daily wage of unskilled worker. Some findings: Higher retail prices for some drugs, particularly the more expensive ones, in low income developing countries compared to the much more affluent OECD countries. The average retail price of each of 20 commonly used drugs in 10 developing countries of Central and South America are all higher than the average retail prices of these in 12 OECD countries. Bala also 1992. (Scrip 1785 12 January 1993 page 19, Hainews no 68, December 1992) 12 drugs in 11 countries. Sagoo K, Bala K. HIV/AIDS: Improving access to essential drugs. Hainews 1999; no 110 December 1999/January 2000: 1-3. Bala K, Sagoo K. Patents and prices. Hainews 2000; no 111 April/May 2000. This is the 4th international survey by Bala. (1992, 1995, 1998, 1999) Retail prices. 16 drugs, 36 countries. How the 16 drugs were identified is described. Grouped in 3 categories according to patent status Collected by colleagues in different countries on a voluntary basis. I.e. countries may differ. Each colleague asked to record from leading pharmacy in the capital city the price of the brand and two top-selling generics of the drugs listed. (Top-selling would probably be what the pharmacy thought was selling best). Total number available of each. Record pack size. Convert to US dollars. Converted by Bala to units of 100. HAI partners and CI members were requested to select a leading retail pharmacy in the capital cities of the respective countries, and discuss with the pharmacy the following: · Ask for the availability and retail prices of the proprietary or brand name product of each drug listed. · Find out the total number of products which include the originators’ brand, branded generics and generics of each of the 16 drugs available in the pharmacy. · Record the retail prices of the originators’ brand and the package size · In cases where there are several products of drug available, record the prices of the next two best selling products in addition to the proprietary brand or top-selling brand. · Record the prices of each package size in the national currency and convert it to US dollars See also IFPMA comments. Conclusions & Recommendations The most striking feature in this survey are the following: · The higher prices of proprietary drugs in some of the developing countries of Africa, Asia and Latin America compared to prices in the 10 OECD countries. The retail prices of 15 out of the 18 dosage forms of eleven drugs for which comparable data are available are all higher in some of the developing countries than in the OECD countries. the WHO/HAI methodology for measuring medicine prices Compiled by Kirsten Myhr in 2000 as background to the development of 25 Kirsten MYHR, Literature ReviewPrice Survey (2000) ICTSD, WHO and the World Bank Institute Developing a Methodology to Assess the Impact of TRIPs-plus Provisions Affecting Drug Prices 31 July to 1 August 2006 DRAFT NOT FOR CIRCULATION · Proprietary brand forms of several of the multi-source drugs surveyed are the only products available in many of the African countries enjoying a monopoly market, although low priced generic equivalents, are available in the world market. These countries do not offer patent protection to drugs. · There is a very wide variation of retail prices in the countries surveyed: (i) The variation in the retail prices of proprietary drugs are much wider (range: 1:16-1:59), than the variation in prices of generic equivalents (range 1:7-1:18). (ii) The variation in the retail prices of multi-source drugs in developing countries (range 1:1.7-1:59) are much wider than the variations in OECD countries (range 1:2-1:11.5) It is assumed that market forces promote competition. It should therefore follow that in a free market, competition will result in lowering and more importantly, leveling of the prices. This appears to be so, in the OECD countries and to a certain extent in the generic drugs market in the developing countries but not in the proprietary drug market in developing countries. The smaller variation in retail drug prices in OECD may be due, as stated earlier, among others, to the following: · Co-marketing arrangement by manufacturers; · Parallel importing; · Reference pricing; and · Drug pricing policies. The wide variation in prices of proprietary drugs in the developing countries suggests that the guiding principle which the drug industry seems to adopt in fixing prices is to set the limits according to what the market can bear. Profit maximisation seems to be the only objective. There is evidence that competition is possible in the pharmaceutical market and this will bring prices down. Data from India proves this. When competitors introduce their products, the originators will lower their prices and compete with the national firms. They will not withdraw from the market. Thus, it is important to introduce generic competitors as early as possible to prevent the originators having time to secure brand loyalty to their products by skillful promotion. There is a time lag between the introduction of a drug in the world market and a competitor to get its product into the home market. It takes further time to capture adequate market share so as to increase production, lower costs and compete with the originator. The Indian data on retail prices of three drugs recently introduced and four others which were introduced much earlier, illustrate this phenomenon and underscores the need for national policies on intellectual property system with provisions to enable national firms to initiate production of new drugs as early as possible. Indian firms were able to do this by a process of reverse engineering. This was possible because the Indian national legislation on patents did not provide patent protection for products. However with TRIPs Agreement taking effect, all member states of the WTO should provide patent protection for products and processes for 20 years. The only way national firms can initiate production is by compulsory licensing which is allowed in the TRIPs Agreement. Nevertheless, only a few of the advanced developing countries can use compulsory licensing to manufacture new drugs. A vast majority of developing countries do not have any facilities for production of pharmaceuticals. These countries depend on imports of raw materials and finished products. They can have access to lower priced drugs produced in the more advanced developing countries or by generic manufacturers in some developed countries only by parallel importing. This is also allowed in the TRIPs Agreement. Analysis of empirical data provided in this paper supports the position that compulsory licensing and parallel imports are two provisions which should be in all national legislations on intellectual property rights. TRIPs Agreement allows these provisions to be included in the national legislation on prices. This will enable developing countries regular access to good quality essential drugs at affordable prices. Wong JQ. A comparative study of drug prices in the Philippines and in Asean countries. (internal report?) 1999. the WHO/HAI methodology for measuring medicine prices Compiled by Kirsten Myhr in 2000 as background to the development of 26 Kirsten MYHR, Literature ReviewPrice Survey (2000) ICTSD, WHO and the World Bank Institute Developing a Methodology to Assess the Impact of TRIPs-plus Provisions Affecting Drug Prices 31 July to 1 August 2006 DRAFT NOT FOR CIRCULATION 25 drugs in 51 brands from multinational companies to ensure they were widely available, i.e. same brand names in all countries. As I interpret it, brands comparises innovator’s brand and branded generics (otherwise you would not have more than 25 products). 5 ‘levels’ with one pharmacy from each. Philippines, Thailand, Malaysia, Singapore, Indonesia. Exchange rate 5 January 1999. Pesos. Prices found averaged for each substance in each country. Price ratio = Philippines: country of comparison. Also a comparison between sectors. E.g. calculated mark-up in Philippine private hospitals to be 18.5%. Very few matches especially in finding pharmacies from same sector. Malaysia no specified sector, Indonesia only one pharmacy, Thailand 2. 12 generics checked. No information on the generics, if there were one of each substance, if it was the same in each country etc. Descriptive study. Main findings that Philippine drug prices for branded products are 40-70% higher than in Thailand, Malaysia and Indonesia. Singapore has higher prices, but also a higher per capita income. Lim JY. Issues concerning high drug prices in the Philippines. Unpublished? 1997. His paper has the following sections: 1. High drug prices in the Philippines which is an introduction as to why this issue is raised (reason to believe prices in the Philippines are high, with references e.g. to HAI-survey). 2. Analysing trends in prices of ten essential drugs where prices in the Philippines are compared with UNICEF prices for second half of 1994 to second half of 1995. Philippine prices have been averaged for brands and generics (I suppose this means innovator and branded generics in one group). 3. Demand elasticity and differential price behaviour among drugs. 4. Price differentials and competition between brand-named drugs and generic drugs, addressing e.g. the fact that drugs such as nifedipine with less competition has a higher price relattive to the UNICEF price. 5. Inflation rates of drug prices. Shown together with the general CPI inflation as well as the inflation of prices quoted by UNICEF. After these chapters he concludes: Drug prices in the Philippines are much higher than in other countries and in comparison to UNICEF’s suggested prices for essential drugs. Brand-named drugs are also much higher in prices than their generic counterparts by an average ratio of around 2 to 1. Cost reductions in drug production abroad have not fully benefited the Philippines since most of these cost reductions have not been fully absorbed locally. This, however, has allowed inflation in drug prices to be below general price inflation in the Philippines, but has maintained (and perhaps aggravated) the disparity of Philippine drug prices with those abroad. The differential performances of various drugs in terms of prices and mark-ups over foreign prices may be due partly to the nature of the drug, particularly demand elasticities of the drugs. The amount of competition of branded and generic names for each type of drug has some correlation with the mark-up over foreign costs of that particular drug. 6. Structure of costs of production (production, tariffs and costs of imported inputs, labour costs, marketing, promotion and distribution, other) the WHO/HAI methodology for measuring medicine prices Compiled by Kirsten Myhr in 2000 as background to the development of 27 Kirsten MYHR, Literature ReviewPrice Survey (2000) ICTSD, WHO and the World Bank Institute Developing a Methodology to Assess the Impact of TRIPs-plus Provisions Affecting Drug Prices 31 July to 1 August 2006 DRAFT NOT FOR CIRCULATION 7. Monopolistic competition in the drugs industry. Finally the paper gives recommendations – also for further studies. Flaws/problems/limitations The paper (unknown status) has no chapter discussing methodology. Philippine prices seems to be retail, but not clearly stated. Prices are said to come from the monitoring data of the Philippine National Drugs Policy. UNICEF prices are fob Copenhagen. NB Most of the Philippine products are combinations which are then compared to single component UNICEF products. The explanation given on why prices of TB drugs are closer to UNICEF prices than prices of other drugs seems strange. He seems to be over-stating the importance of price elasticity. Reekie WD. Pharmaceutical prices and distribution patterns in the Philippines: analysis and comparisons. June 2000. The paper, which has been supported by the research-based industry, considers the following issues relating to the Philippines: i) international price comparisons ii) market structure – manufacturing and distribution iii) market structure – retailing iv) government encouragement of generic supply v) the state’s concern with generic demand The two papers by Lim and Wong are commented upon. He calls UNICEF prices “charity” or “give away” prices. Retail mark-ups are low (8 %) by international standards. The paper recommends some actions to be taken to reduce cost, including centralised procurement, careful encouragement of generic demand. His final comment is: “Government should not try artificially to restrain prices in those sectors where prices are already market based and competitively determined. Rather is should concentrate its efforts on procuring and supplying medicines for the poor and underserved.”