Drug industry is considering more use of differential pricing, conference hears

BMJ 2011; 343 doi: (Published 09 December 2011) Cite this as: BMJ 2011;343:d8049
  1. Elizabeth Sukkar
  1. 1London

The drug industry is indicating that it is more willing to participate in differential pricing to improve access to its products.

Severin Schwan, chief executive officer of Roche, the world’s fifth largest drug company, told a drug and biotechnology industry conference organised by the Financial Times and held in London on 5-6 December that one of the big trends he expects to occur in the future is the use of differentiated rather than uniform pricing.

Pricing can be differentiated according to countries’ needs and ability to pay and also, more challengingly, between patients of different socioeconomic status in the same country.

The industry has always been a bit nervous about differential pricing, and the practice is not widespread. This is mainly because companies are worried that more lowly priced products will flow back to high income countries, the source of most companies’ profits. The industry is also concerned about the practice of external price referencing, whereby countries calculate a price for a drug on the basis of lower prices elsewhere.

Wim Leereveld, chief executive officer of the Netherlands based Access to Medicine Index, which ranks manufacturers on their efforts to enhance global access to drugs, told the BMJ that it was promising that Dr Schwan made the comments publicly.

“I would like to see more companies making similar comments, but we will increasingly measure their action on the ground through our index. Companies’ use of differential pricing will be rewarded more by the index,” he said. The next index is due to be published in September 2012. The organisation gets its funding from the Dutch and UK governments and the Bill and Melinda Gates Foundation.

Differential pricing between countries has not been broadly adopted. The leaders are GlaxoSmithKline, Gilead, Novo Nordisk, Abbott, and Merck & Co, said Mr Leereveld.

To date, only a few big players have “experimented” with within-country differential pricing, including GlaxoSmithKline, Boehringer Ingelheim, Merck & Co, Novartis, and Novo Nordisk, said Mr Leereveld.

However, he pointed out that, under a potential new initiative announced by the Bill and Melinda Gates Foundation, three US and three European companies will apply differential pricing in the Philippines, Ghana, and Peru.

Differential pricing has become an “accepted idea” in the industry but has mainly been used for drugs for neglected diseases and antiretrovirals, said Richard Bergström, director general of the European Federation of Pharmaceutical Industries and Associations. A 2010 report commissioned by the UK’s Department for International Development found that differential pricing has been limited to vaccines, contraceptives, and antiretrovirals, mostly in low income countries.

However, Mr Bergström told the BMJ: “There have been some moves to start it for cancer treatments and therapies for long term ailments.” His federation supports the concept, as it believes that it improves access to drugs around the world, but he emphasises that “rich countries need to take responsibility.”

“Richer nations should not expect the same low prices that the industry may provide to low and middle income countries; otherwise it will not work. Someone has to pay for innovation. Importantly, rich countries must abide by European Union law so that they do not allow the import of these lower priced drugs into their territories from poorer countries.”

From the federation’s “understanding,” GlaxoSmithKline has had a positive experience when selling its products at a lower price in the Philippines and Kenya and has not seen a leakage of the products into rich countries.

A spokesperson for the company told the BMJ that its “flexible pricing system,” which offers poorer countries lower prices, has been “challenging, and the work is at an early stage.” However, the results of some of its initiatives so far are “promising, indicating that price reductions are extending access to more patients and providing a sustainable return to GSK.”

The company has been offering lower prices to governments that buy larger volumes of its products for people on lower incomes than to private clinics. For instance, it has seen monthly sales of the vaccine Cervarix rise significantly in the Philippines after reducing its price by 60%, settling at around six times the volume sold before the price reduction was introduced. In Brazil, sales volumes of its antibiotic co-amoxiclav (marketed as Augmentin) have substantially increased since GSK reduced the market price for the most prescribed presentations by half in March 2010.

Neither has it seen a major problem with external reference pricing, and it believes on balance that the benefits in terms of getting more drugs to more people and moving to a more volume based approach outweigh any risks.


Cite this as: BMJ 2011;343:d8049

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