Suerie Moon from the Harvard School of Public Health warns against falling back on stale solutions for ensuring access to essential medicines.
For nearly a decade, a bright spot on World AIDS Day has been steady growth in the number of people in developing countries accessing lifesaving HIV treatment, which increased 40-fold from 2002-2012. But this year, Board discussions at the Global Fund to Fight AIDS, Tuberculosis and Malaria have set off alarm bells about a potential retreat from the time-tested pro-generic policies that enabled such progress. At issue is a proposed “blue-ribbon Task Force” on tiered-pricing of medicines for middle-income countries (MICs), spearheaded by the Global Fund together with the GAVI Alliance, UNDP, UNICEF, UNITAID, and the World Bank.
“Tiered pricing” refers to pharmaceutical companies setting prices on (usually widely-patented) medicines at levels below those charged in high-income markets. At first glance, it sounds reasonable enough – lower prices for poorer countries. But, as summarized in a 2011 study, evidence from the past ten years shows that tiered pricing is in practice a feeble access strategy. First, it is demonstrably less reliable and effective than generic competition in achieving affordable prices for quality medicines. A 2010 study found that PEPFAR saved $323 million from 2005-2008 by purchasing generics rather than tiered-priced HIV drugs. Analogous cost-savings estimates for the Global Fund are not available, but could easily be an order of magnitude higher. Generic competition, often enabled by governments using flexibilities in intellectual property rules, has been central to improving medicines affordability indeveloping countries.
Second, tiered-pricing policies are voluntary programs of pharmaceutical companies and frequently arbitrary, especially with respect to MICs. Companies may offer the lowest prices to low-income countries, but prices and policies for MICs are all over the map. Companies may offer discounts on some drugs but not others, to some high-burden countries but not others, for a limited time or with strings attached. The rationale underlying a given price is generally not transparent, and the prices offered are not necessarily affordable.
Illogically, the proposed Task Force would be jumping to conclusions, pre-supposing that tiered-pricing is the answer to the question rather than wrestling with the question itself: how to make medicines affordable in middle-income countries? This question applies not only to vaccines or HIV drugs, but is relevant to all therapeutically-important widely-patented medicines, including those for non-communicable diseases.
The rise of the MICs is challenging pre-existing arrangements in the development aid system, including the informal norm that “rich” countries pay higher prices for patented medicines to cover R&D costs, while “poor” countries purchase generics (at least for some priority diseases). But this rich/poor classification is neither as easy nor useful as it once was. MICs now include over 100 countries, home to over two-thirds of the world population, with 75% of the world’s poor and a majority of the global burden of disease, with per capita incomes spanning from $2.84 to $33.56/day. At the same time, the pharmaceutical industry is relying heavily on MICs for worldwide growth to offset flat sales in Europe and the US. In this complex context, will a strategy of voluntary price discounts really deliver affordable prices for the MICs?
Other approaches, such as tiered-royalties or tiered-lump-sum payments for R&D, could capture the dynamic efficiencies of generic competition, while reaping proportionally greater contributions for R&D from the MICs. Alternatives like these merit greater analysis and attention. Indeed, instead of falling back on stale solutions, the Global Fund and broader global healthcommunity should explore new ideas that will ensure that all countries can afford essential medicines.