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Global Framework for Differential Pricing of Pharmaceuticals

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Author Info

  • Daems, Rutger

    (Planet Strategy Group)

  • Maes, Edith

    ()
    (Maastricht School of Management, and Planet Strategy Group)

  • Ramani, Shyama V.

    ()
    (UNU-MERIT, and Maastricht University)

Abstract

This paper examines how equitable, differentiated pricing can improve access to and affordability of medicines, particularly in low- and middle-income countries, and how governments and supranational agencies can create an environment that enables pharmaceutical companies to operate a sustainable business model benefitting all key stakeholders. Using value-based pricing techniques in combination with a non-linear function that captures national income parameters as defined in the Human Development Index together with health system variables, the authors have developed an integrated pricing policy framework. The degree to which the proposed framework offers a sustainable solution to the problem of access to medicines depends on: the economic development status of a country, the value of a particular medicine to its therapeutic class and the incidence of the relevant disease, and the extent to which market segmentation can be applied. This paper further argues that for equitable, differential pricing to succeed, policymakers and lawmakers must design and implement a regulatory and legislative framework that prevents leakage through parallel trade and price referencing between affluent and poorer segments when discounts are applied.

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File URL: http://www.merit.unu.edu/publications/wppdf/2011/wp2011-054.pdf
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Bibliographic Info

Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 054.

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Date of creation: 2011
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Handle: RePEc:unm:unumer:2011054

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Related research

Keywords: globalization; pharmaceuticals; pharmaceutical industry; public policy; corporate strategy; pricing; access; equity;

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References

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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.
  2. 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.
  3. Guennif, Samir & Ramani, Shyama, 2010. "Catching up in pharmaceuticals: a comparative study of India and Brazil," MERIT Working Papers 019, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  4. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
  5. Michael Drummond & Bengt J├Ânsson & Frans Rutten & Tom Stargardt, 2011. "Reimbursement of pharmaceuticals: reference pricing versus health technology assessment," The European Journal of Health Economics, Springer, vol. 12(3), pages 263-271, June.
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Citations

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Cited by:
  1. Rutger P. Daems & Edith L. Maes & Christoph Glaetzer, 2012. "Pharmaceutical Pricing in a Globalized World: Crossing the income divide and ability to pay," Working Papers 2012/24, Maastricht School of Management.
  2. Rutger P. Daems PhD & Edith L. Maes DBA, 2013. "Pharmaceutical Portfolio Management: Global Disease Burden and Corporate Performance Metrics," Working Papers 2013/07, Maastricht School of Management.
  3. Edith Maes & Rutger Daems, 2011. "Perspectives on Public Private Partnership: The R&D Based Vaccine Industry," Working Papers 2011/36, Maastricht School of Management.

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