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Global Framework for Differential Pricing of Pharmaceuticals

Author

Listed:
  • 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.

Suggested Citation

  • 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).
  • Handle: RePEc:unm:unumer:2011054
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    File URL: https://www.merit.unu.edu/publications/wppdf/2011/wp2011-054.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. 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, January.
    3. 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.
    4. Michael Drummond & Bengt Jönsson & Frans Rutten & Tom Stargardt, 2011. "Reimbursement of pharmaceuticals: reference pricing versus health technology assessment," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(3), pages 263-271, June.
    5. 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).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Edith Maes & Rutger Daems, 2011. "Perspectives on Public Private Partnership: The R&D Based Vaccine Industry," Working Papers 2011/36, 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. 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.

    More about this item

    Keywords

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

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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