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

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  • Patricia M. Danzon
  • Andrew W. Mulcahy
  • Adrian K. Towse

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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17174.

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Date of creation: Jun 2011
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Publication status: published as “Pharmaceutical pricing in emerging markets: Effects of income, competition, and procurement” with Andrew W. Mulcahy and Adrian K. Towse. Health Economics 2013. DOI: 10.1002/hec.3013
Handle: RePEc:nbr:nberwo:17174

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  1. Stefan Szymanski & Tommaso Valletti, 2005. "Parallel trade, price discrimination, investment and price caps," Economic Policy, CEPR & CES & MSH, vol. 20(44), pages 705-749, October.
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  4. Tommaso M. Valletti & Stefan Szymanski, 2006. "PARALLEL TRADE, INTERNATIONAL EXHAUSTION AND INTELLECTUAL PROPERTY RIGHTS: A WELFARE ANALYSIS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 499-526, December.
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  12. Szymanski, Stefan & Valletti, Tommaso, 2005. "Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis," CEPR Discussion Papers 5022, C.E.P.R. Discussion Papers.
  13. Danzon, Patricia M. & Towse, Adrian, 2003. "Differential Pricing for Pharmaceuticals: Reconciling Access, R&D and Patents," Working paper 258, Regulation2point0.
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Cited by:
  1. Patricia M. Danzon & Adrian K. Towse & Jorge Mestre-Ferrandiz, 2012. "Value-Based Differential Pricing: Efficient Prices for Drugs in a Global Context," NBER Working Papers 18593, National Bureau of Economic Research, Inc.
  2. Patricia M. Danzon & Michael F. Furukawa, 2011. "Cross-National Evidence on Generic Pharmaceuticals: Pharmacy vs. Physician-Driven Markets," NBER Working Papers 17226, National Bureau of Economic Research, Inc.

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