IDEAS home Printed from https://ideas.repec.org/p/msm/wpaper/2012-24.html
   My bibliography  Save this paper

Pharmaceutical Pricing in a Globalized World: Crossing the income divide and ability to pay

Author

Listed:
  • Rutger P. Daems

    (Planet Strategy Group, Brussels, Belgium)

  • Edith L. Maes

    (Maastricht School of Management, PO Box 1203, 6201 BE Maastricht, The Netherlands; E-mail address: edith.maes@telenet.be)

  • Christoph Glaetzer

    (Janssen Asia Pacific, Singapore)

Abstract

OBJECTIVES To examine pharmaceutical pricing strategies not only through the lens of efficiency but equity as well, and propose analytic methods that support policymakers and executives in making pricing and reimbursement decisions. METHODS The paper takes a 3-dimensional approach (triangulation) in defining international pricing policy for pharmaceuticals using: cost-effectiveness analysis (CEA), willingness to pay analysis (WTP), and ability to pay analysis (ATP). It attempts to find a balance between various economic methods of which some focus on effectiveness while others are geared towards incorporating equity in the equation. RESULTS A model has been developed to assess the ATP of 120 countries based on a country’s score in the human development index (HDI) as defined and measured by the United Nations Development Program, and published annually in the United Nations Human Development Report. The non-linear index has been applied to a number of drugs in different therapeutic categories without disclosing brand names. Prices in affluent countries – and to an increasing extent in the fast-growing middleincome countries – could generate sufficient revenue to pay for the cost of innovation benefiting all parties, whereas prices in the lowest-income countries in principle need only cover their marginal cost. CONCLUSIONS Besides the standard cost-effectiveness analysis (CEA) and willingness to pay analysis (WTP), a third method should be used in conjunction that measures the ability to pay (ATP) with the HDI index as yardstick. We recommend that ATP becomes an additional practice in policy decision-making and in defining international pricing strategies for pharmaceuticals in order to provide sustainable access to medicines.

Suggested Citation

  • 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.
  • Handle: RePEc:msm:wpaper:2012/24
    as

    Download full text from publisher

    File URL: http://web2.msm.nl/RePEc/msm/wpaper/MSM-WP2012-24.pdf
    File Function: First version, 2012
    Download Restriction: no

    References listed on IDEAS

    as
    1. Daems, Rutger & Maes, Edith & Ramani, Shyama V., 2011. "Global Framework for Differential Pricing of Pharmaceuticals," MERIT Working Papers 054, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Access-to-medicines; international pricing; cost-effectiveness; willingness-to-pay; ability-to-pay; equity.;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:msm:wpaper:2012/24. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maud de By). General contact details of provider: http://edirc.repec.org/data/msmmmnl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.