Dr Suerie Moon, Special Advisor to the Dean & Instructor at Harvard School of Public Health joined us a few weeks ago at the 12th annual World Vaccine Congress in Washington DC to discuss her views on vaccine pricing.
Dr. Moon described the current context for vaccine pricing strategies, which includes a number of important trends including unmet needs with regards to health and access to vaccines. There are increased political demands and a newly emerging "access norm." There is increased patenting in developing countries due to the TRIPS countries.
Tiered pricing generally refers to different prices in different markets. It is applicable when markets can be segregated. Correlations are made between price and ability to pay. It is used often synonymously with differential pricing, market segmentation, price discrimination, profit maximizing strategy. These methods are supplier-focused.
"Equity pricing" is more closely related to the WHO concept of essential medicines. There are differences in the results for access and prices when comparing equity pricing vs. tiered pricing.
The three key questions Dr. Moon discussed are:
1. How do we make medicines affordable for all?
2. Who should pay?
3. Who decides and how?
First, using an example from HIV/AIDS drugs, prices reach an optimal level for access when we have robust generic competition. (Waning et al 2009) Competition reduces prices over time, and prices decrease with increase in number of competitors. Tiered prices tend to interact with the generic competition in the markets. Tiered pricing may offer a useful activity for providing access, but in most cases it will be important for competition to come quickly.
Dr. Moon stressed the importance of a growing middle income group of nations, changing the typical binary world view. Income across countries falls into a wide spectrum, and pricing appears arbitrary in middle income countries.
Classifications that are used for tiered pricing include: per capita GNI, disease burden (such as for HIV prevalence), UN-classified LDC’s, human development index (in at least one case), and regional segmentation (African countries, for instance, may be given the lowest prices regardless of income). A rough example of the differences in pricing is the Pneumococcal vaccine, which ranges from $7 per dose in the UNICEF/GAVI agreement (PCV10), while US public sector price ranges from $71.04 (PCV7) to $91.75 (PCV-13) per dose. Prices depend on the governments and negotiators as well as the potential profitability for the companies. There is no consensus on the appropriate definitions for different tiers for the different markets.
Finally, who decides pricing and how? Government regulations in high income countries use reference pricing. In developing countries, however, it is the sellers who have the majority of the decision making power. Decisions about prices depends on country eligibility, and these processes are generally not transparent. Dr. Moon quoted the WHO (Innovation and Public Health, 2006) saying that "access to drugs cannot depend on the decisions of private companies but is also a government responsibility." This does not appear to be the current state of things.
Dr. Moon then discussed alternatives to tiered pricing. De-linking the R&D market from the medicines production market could work to provide access while providing sufficient incentives for continued research and development.. This could implement push mechanisms (grants) or pull mechanisms (prizes). These would still encourage competition in medicines production, and maintain sustainability. Competitive production could be maintained via voluntary licensing (e.g. Medicines Patent Pool), compulsory licensing, voluntary non-patenting, etc.
For the whole presentation and details on the above mentioned focus points, please download the presentation here.
You might also be interested in:
- Daniel Berman (MSF) – Vaccine pricing and adaptation in developing countries
- Bruce Lee (Uni Pittsburgh) – Pricing of new vaccines
- Sheldon Jacobson (Uni Illinois) – Vaccine Pricing: An analytics perspective