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Global Framework for Differential Pricing of Pharmaceuticals

  • Daems, Rutger

    (Planet Strategy Group)

  • Maes, Edith

    ()

    (Maastricht School of Management, and Planet Strategy Group)

  • Ramani, Shyama V.

    ()

    (UNU-MERIT, and Maastricht University)

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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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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  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. 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.
  3. Tommaso Valletti & Stefan Szymanski, 2006. "Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis," CEIS Research Paper 75, Tor Vergata University, CEIS.
  4. 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).
  5. 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, June.
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