E-DRUG: Can we standardise the pharmaceuticals' mark-up on cost? (11)
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Dear E-Druggers,
I certainly subscribe to Levison's and J.B. Russo's points on the specificity of pharmaceuticals mark-ups for diverse countries and on the need to share pricing information. However, I believe that from the recent Zeist conference on pharmaceutical policy a set of practical conclusions emerged that could help formulating guidelines for pharmaceutical pricing in developing countries (http://pp2007.pharm.uu.nl/conference/).
First of all, the relative importance of local factors was recognised in the determination of prices to the consumer, and the respective need to understand local markets, local players, their interaction, and local cost structures. On the other hand, it was debated that although price controls (i.e. regulating profit margins) are still very popular, in those countries with low enforcement capacity it may not be that useful to impose mark-ups that then go systematically ignored.
From a study we conducted in urban areas in Mozambique (Russo and McPake 2007) it emerged that statutory mark-ups are only unevenly applied, but that the low profit margin for importers and the comparatively higher margin for retailers reduced considerably the scope for competition in that market. Furthermore, we found that the pharmaceutical market in urban areas is divided into high-cost and low-cost segments focussing separately on brands and generics. We concluded that instead of spending its regulatory effort trying to identify the right mark-ups, the government could manage demand and supply so that effective cheaper options get selected more widely.
Perhaps it would be useful if we could start a list of tentative recommendations from recent pharmaceutical pricing studies that people could discuss and later consolidate into more formal guidelines, for example:
1. Conduct price surveys and industry studies in your own country; before designing adequate pricing policies you need to know what the true price of your drugs is, how such price gets determined, and how your market works.
2. Try to increase competition in your market; as a generalisation a competitive market will offer lower prices and better availability than an oligopolistic one.
3. Pharmaceutical regulation should aim at encouraging the use of effective generics as opposed to expensive brands. Improving the quality of generics can be an effective way to increase affordability of drugs in anyone country.
4. When designing a pricing policy always consider your government capacity to enforce it.
Hope this helps.
Best wishes,
giuliano
Giuliano Russo, MSc, DrPH
Consultant in Health Economics and Policy
Health Policy Unit,
London School of Hygiene and Tropical Medicine
9 Bedford Square, WC1B 3RA
Tel +44 20 7927 2438
Giuliano.Russo@lshtm.ac.uk