Balancing medicine prices and business sustainability: analyses of pharmacy costs, revenues and profit shed light on retail medicine mark-ups in rural Kyrgyzstan

Insulin price components: case studies in six low/middle-income countries

Introduction

Understanding price components for insulin products can help design interventions to improve insulin affordability in low/middle-income countries.

Methods

An adapted WHO/Health Action International standardised methodology was used in Brazil (Rio de Janeiro), China (Hubei and Shaanxi Provinces), Ghana, India (Haryana State), Indonesia and Uganda. Selected insulin products had their prices traced backwards through the supply chain from public and private sector retail outlets in the capital city and a district town, supplemented with key informant interviews.

Results

Cumulative mark-ups ranged from 8.7% to 565.8% but the magnitude of mark-ups was country specific and variable within and across sectors and regions. The proportion of the patient price attributed to the manufacturer’s selling price varied from 15.0% to 92.0%. Pricing regulations in China, India and Indonesia reduced wholesale and retail mark-ups but did not guarantee low prices. Most countries had removed import duties (Ghana, India, Indonesia, Uganda), but additional tariffs of 3.5% were still applied in Ghana. Value-added tax in the private sector ranged from 5% to 20% across the countries.

Conclusion

There are no clear trends in the mark-ups applied to insulin or specific differences in the price structure. A uniform approach to improving insulin access through regulating price components is unlikely to be successful, but elimination of duties and taxes, price regulation and greater price transparency could help influence prices and hence affordability.

Incentives and disincentives to drug innovation: evidence from recent literature

Aim: Drug innovation is strongly driven by economic incentives. How these incentives work in determining or changing the level of activity of innovators and the direction of their innovation remains understudied. We seek to address these issues in reviewing recent literature on drug innovation, which offers one major unifying theme of pharmacoeconomic scholarship presented at the 2019 AEA-ASSA annual convention. Methods: Drawn from three AEA-ASSA convention panel sessions, papers were reviewed for newly charted research terrains and new research trajectories, and their theoretical and practical implications on efficiency, effectiveness, and value in the production and utilization of pharmaceutical products. Results: While high and continuously rising drug prices are typically claimed as the price of scientific innovation, the reviewed literature finds that this link only partially accounts for the problem. High risk aversion owing to information asymmetries and vastly intractable uncertainties is prevalent among innovating firms. Predatory business models abound. Reverse predatory strategies also exist to maintain product exclusivity without much added clinical benefits, and to constrain generic competition. CEO compensation practices contribute to rising drug prices. Finally, the US government's hands-off policy on drug list prices leave the forces of supply and demand to allocate them and reward innovation (at times perversely), even as the government extensively regulates or over-regulates practically every other aspect of innovation. Conclusions: Price-elasticity of demand is critical in drug innovation. The drug value chain is price-sensitive to the balance of incentives and disincentives to innovation. American health policy should consider charting a middle course that introduces some form of regulatory price control, while stimulating and sustaining the benefits of market competition. That should incentivize stakeholders to take into account both resources and value for money in making decisions based on best-quality, clinical-economic evidence.

Affordable and equitable access to subsidised outpatient medicines? Analysis of co-payments under the Additional Drug Package in Kyrgyzstan

BACKGROUND

Out-of-pocket (OOP) payments can constitute a major barrier for affordable and equitable access to essential medicines. Household surveys in Kyrgyzstan pointed to a perceived growth in OOP payments for outpatient medicines, including those covered by the benefits package scheme (the Additional Drug Package, ADP). The study aimed to explore the extent of co-payments for ADP-listed medicines and to explain the reasons for developments.

METHODS

A descriptive statistical analysis was performed on prices and volumes of prescribed ADP-listed medicines dispensed in pharmacies during 2013-2015 (1,041,777 prescriptions claimed, data provided by the Mandatory Health Insurance Fund). Additionally, data on the value and volume of imported medicines in 2013-2015 (obtained from the National Medicines Regulatory Agency) were analysed.

RESULTS

In 2013-2015, co-payments for medicines dispensed under the ADP grew, on average, by 22.8%. Co-payments for ADP-listed medicines amounted to around 50% of a reimbursed baseline price, but as pharmacy retail prices were not regulated, co-payments tended to be higher in practice. The increase in co-payments coincided with a reduction in the number of prescriptions dispensed (by 14%) and an increase in average amounts reimbursed per prescription in nearly all therapeutic groups (by 22%) in the study period. While the decrease in prescriptions suggests possible underuse, as patients might forego filling prescriptions due to financial restraints, the growth in average amounts reimbursed could be an indication of inefficiencies in public funding. Variation between the regions suggests regional inequity. Devaluation of the national currency was observed, and the value of imported medicines increased by nearly 20%, whereas volumes of imports remained at around the same level in 2013-2015. Thus, patients and public procurers had to pay more for the same amount of medicines.

CONCLUSIONS

The findings suggest an increase in pharmacy retail prices as the major driver for higher co-payments. The national currency devaluation contributed to the price increases, and the absence of medicine price regulation aggravated the effects of the depreciation. It is recommended that Kyrgyzstan should introduce medicine price regulation and exemptions for low-income people from co-payments to ensure a more affordable and equitable access to medicines.

Lessons from one year experience of pooled procurement of pharmaceuticals: exploration of indicators and assessing pharmacies` performance

BACKGROUND

Joint procurement of medicines is a way to improve access and justice in developing countries. The aim of this study is to determine local indicators for assessing the performance of joint procurement agencies and compare the indicators in those pharmacies which use centralized purchasing before and after this change.

METHODS

This was a mixed method study. In the first qualitative phase, 3 expert panels were held including 20 national experts who were selected through purposeful sampling. Data was analyzed applying a five-stage framework analysis using MAXQDA. In the second quantitative phase, financial, supply and procurement, physical and functional indicators of two hospitals affiliated with joint procurement were assessed and the satisfactions of patients from the pharmacy performance were compared applying a valid questionnaire. Data was analyzed using SPSS through independent test, Paired t-test and ANOVA.

RESULTS

Results show that after settlement of joint procurement, the cost of transportation has increased by 54%, a part of the cost of overhead has increased by 30%, the cost of manpower has increased by 88.9% and cost of insurance of warehouses has increased by 71.85% in 2016 compared to 2015. In addition, the total costs of holding were 89.8% of selling revenue. In other words, the profit was about 10% of revenue in total. Moreover the average score of pharmacies under the Holding has been higher than similar ones in all aspects of satisfaction from the patients` points of view.

CONCLUSION

The one-year experience of deploying centralized purchasing to supply medicine has led to increased income and patient satisfaction. However, increase in staffing costs, longevity, overhead and warehouse costs have been significant that need appropriate monitoring and interventions. Graphical abstract Graphical abstract of lessons from one year experience of pooled procurement of pharmaceuticals in south of Iran.

With the help of a foreign ally: biopharmaceutical innovation in India after TRIPS

This article investigates the implications of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which reached full-fledged implementation in 2005, for the patenting activity of Indian biopharmaceutical companies. The Indian biopharmaceutical industry is well-known for its generic producers, whose business models capitalize on the opportunity to reverse-engineer patented compounds and produce them at low costs through process innovation. By strengthening intellectual property rights, TRIPS determined a major regulative change, which presents the characteristics of an institutional shock. The examination of the patenting and alliance activity of 123 Indian biopharmaceutical firms between 1999 and 2009 reveals two important insights. First, the innovation outcome of Indian biopharmaceuticals has sharply increased during the transition to TRIPS-compliant regulation, suggesting that Indian companies have been capable and willing to transit from an imitation-based to an innovation-based business model. Second, those biopharmaceutical firms holding cross-border alliances to foreign partners have proved significantly more successful at enhancing their innovative capability. This research delivers a multifold contribution to the policy debate surrounding the enforcement of TRIPS in emerging economies. First, it suggests that such regulatory change may have encouraged biopharmaceutical innovation in India, despite the sceptical voices who did not foresee any benefits because of inherent inertia of the industry. Second, by arguing and testing the advantages of foreign partnerships, this research highlights that the much feared return of pharmaceutical foreign companies to India could instead favour adaptation to institutional change. Implications for Indian public health are particularly critical. The impact of TRIPS on drug pricing and on the capability--and willingness--of Indian biopharmaceuticals to invest in local health conditions are two crucial points of discussion.