Public Procurement and Price Discrimination of Antiretroviral Therapy

Abstract

Recent international efforts by the Accelerated Access Initiative, the Clinton Foundation HIV/AIDS Initiative, the Global Fund, and Médecins Sans Frontières (MSF) among other focused on establishing competitive and transparent procurement processes for antiretrovirals (ARVs) purchases and on disseminating ARV prices. Nevertheless, developing countries continue to pay higher prices for ARVs depleting scarce health care resources.

This study analyzes the ARV prices paid by 8 public programs in Chile, Colombia, Ecuador, Peru, and Venezuela in 2004. The objectives of the study were to assess differences between ARVs acquisition prices and the prices negotiated by the countries' Ministries of Health with the pharmaceutical industry. The study compared acquisition prices with those listed by the Global Fund and the Joint UNICEF-UNAIDS Secretariat-WHO-MSF Project. The study also assessed the potential pharmaceutical companies' ARV price discrimination based on countries' per capita income, population, HIV/AIDS patients, and health care expenditures.

Price information of ARVs purchased in 2004 by the 8 public programs included in the study was collected from the countries' Ministries of Health. Data was collected for originator and generic ARVs and included the following: drug brand and generic name, formulation, route, dosage, registration date, purchase volume in units, purchase volume and average purchasing price in DDP (delivery duty paid) terms, and company(s) name. Domestic currencies were converted to dollars using the average annual exchange rates as published by the countries' central banks. The average weighted price was calculated for each program. Acquisition prices were compared with the ministers of health negotiated prices and with prices listed by the Global Fund and the Joint UNICEF-UNAIDS Secretariat-WHO-MSF Project. Economic data for each country was collected from international organizations.

Acquisition prices were generally higher than the negotiated prices. Of the 79 items that were included in the study, only four (5.1%) of these items had prices that were lower than the negotiated prices; and one (1.3%) item's price was equivalent to the negotiated price. ARV prices paid in 2004 by the 8 public programs included in the study ranged from 84.7% to 4477.8% of the average negotiated prices with a weighted average of 165.4%. ARV prices paid in 2004 by the 8 public programs were also significantly higher than the prices paid by the Global Fund for ARV purchases for Peru, and higher than the ARV prices listed by the Joint UNICEF-UNAIDS Secretariat-WHO-MSF Project. The study did not found a correlation between per capita income, population, number of HIV/AIDS patients, and health care expenditures and ARV acquisition prices.

In spite of competitive public procurement processes used by the public programs included in the analysis, most ARVs were purchased from multinational originator companies and at higher prices than those negotiated by the Ministries of Health and the price information publicly available. Price discrimination was not found to be a factor explaining price differences. The market share achieved by originator companies could be related to the oligopolistic nature of the pharmaceutical market.

Keywords: Price Negotiations, Price Discrimination, Antiretrovirals

JEL Classification: I19, I10