Pharmaceutical Pricing in Emerging Markets: Effects of Income, Competition and Procurement

33 Pages Posted: 5 Jul 2011

See all articles by Patricia M. Danzon

Patricia M. Danzon

University of Pennsylvania - Health Care Systems Department; National Bureau of Economic Research (NBER)

Andrew Mulcahy

University of Pennsylvania - The Wharton School

Adrian Towse

Office of Health Economics

Date Written: June 2011

Abstract

This paper analyzes determinants of ex-manufacturer prices for originator and generic drugs across a large sample of countries. We focus on drugs to treat HIV/AIDS, TB and malaria in middle and low income countries (MLICs), with robustness checks to other therapeutic categories and other countries. We examine effects of per capita income, income dispersion, number and type of therapeutic and generic competitors, and whether the drugs are sold to retail pharmacies vs. tendered procurement by NGOs. The cross-national income elasticity of prices is 0.4 across high and low income countries, but is only 0.15 between MLICs, implying that drugs are least affordable relative to income in the lowest income countries. Within-country income inequality contributes to relatively high prices in MLICs. Number of therapeutic and generic competitors only weakly affects prices to retail pharmacies, plausibly because uncertain quality leads to competition on brand rather than price. Tendered procurement attracts multi-national generic suppliers and significantly reduces prices for originators and generics, compared to prices to retail pharmacies.

Suggested Citation

Danzon, Patricia M. and Mulcahy, Andrew and Towse, Adrian, Pharmaceutical Pricing in Emerging Markets: Effects of Income, Competition and Procurement (June 2011). NBER Working Paper No. w17174. Available at SSRN: https://ssrn.com/abstract=1879036

Patricia M. Danzon (Contact Author)

University of Pennsylvania - Health Care Systems Department ( email )

3641 Locust Walk
Colonial Penn Center
Philadelphia, PA 19104-6358
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Andrew Mulcahy

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Adrian Towse

Office of Health Economics ( email )

12 Whitehall
London, SW1A 2DY
United Kingdom
+44 207 747 1407 (Phone)
+44 207 747 1419 (Fax)

HOME PAGE: http://www.ohe.org

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