Global Drug Pricing Practices and Pakistan – Asrar Qureshi’s Blog Post #865

Global Drug Pricing Practices and Pakistan – Asrar Qureshi’s Blog Post #865

Dear Colleagues!  This is Asrar Qureshi’s Blog Post #865 for Pharma Veterans. Pharma Veterans aims to share knowledge and wisdom from Veterans for the benefit of Community at large. Pharma Veterans Blog is published by Asrar Qureshi on  WordPress, the top blog site. Please email to asrar@asrarqureshi.com for publishing your contributions here.

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This blogpost partakes from an excellent article by ZUD Babar, published in Journal of Pharmaceutical Policy and Practice. Link at the end.

The medicines pricing policies of country should cover the following objectives.

a. To ensure access to effective, safe, and quality assured affordable medicines for all,

b. To establish fair medicines pricing mechanisms that can improve access,

c. To support the pharmaceutical industry.

It is also important to understand the global medicines pricing setup. 

Global Medicines Pricing Policies and Their Relevance to Local Pricing

In most developed countries, including the United Kingdom, Australia, and New Zealand, there is a public subsidy on pharmaceuticals, both in public sector hospitals and as private sector retail pharmacies. The governments subsidize the cost of medicines, and as a result, the expense incurred by private customers is low, hence medicine pricing does not affect them.

The prices in high-income developed countries are negotiated and controlled through specific drug buying agencies. These agencies are set up separately from drug regulatory authorities. For example, in each of the following countries, there are two separate agencies, one is to ensure drug safety, effectiveness, and quality and the other for cost effectiveness of medicines. For example, in New Zealand; the Medsafe is the regulator and the Pharmaceutical Management Agency of NZ (PHARMAC) is responsible for access and cost effectiveness. In the UK, The Medicines and Healthcare products Regulatory Agency (MHRA) is the regulator whereas National Institute for Health and Care Excellence (NICE) considers the value of new medicines based on the cost-effectiveness of medicines/ and Quality Adjusted Life Years (QALYs).

There are only a few countries in the world, where medicine prices are not controlled. The prices in these countries are very high; examples include the United States and Malaysia. South Asian countries (Pakistan, India, Bangladesh) control medicine prices at the consumer level and private sector retail pharmacies. For any individual brand, prices are uniform and fixed. This system has generated low prices in international terms for Pakistan, India, and Bangladesh. Though several medicines are reasonably priced in international terms, however, there are others for which the prices are high. The majority of these high-priced medicines are innovator brands, though some of them are generics. 

Pakistan Drug Pricing Policy 2018 – Currently in force

Pakistan’s 2018 medicines pricing policy measures the average retail price of a basket of countries including, Sri Lanka, Indonesia, Malaysia, Bangladesh, and Lebanon. Though prices in Sri Lanka are low, however, other benchmark countries including Malaysia, Indonesia, Thailand and the Philippines have some of the highest prices in international terms. Malaysia practices a free market economy with no control over drug prices.

The medicines pricing policy 2018 also uses the average procurement prices of the Australian Pharmaceutical Benefits Scheme (PBS), and UK’s Drug Tariff prices, as a benchmark. The inclusion of these countries as a benchmark for Pakistan is challenging because Australia and the UK all practices Universal Health Coverage with part charges from consumers and no out-of-pocket payments from the marginalized sections of society. On the other hand, Pakistan has significant out-of-pocket consumers’ payments. Another global challenges with the drug prices are that the listed prices from Australian PBS, and the UK’s Drug Tariff, in the public domain publications may not be actual prices. The published prices could be discounted prices after rebates by pharmaceutical companies.

Building Evidence-based Drug Pricing Policies

The best way to form a pricing policy in an LMIC – Low & Middle Income Country, like Pakistan, is by taking into account the data obtained from studies using WHO/HAI pricing methodology. The pricing research has been done in over 50 countries by using this methodology. Through WHO/HAI surveys, the prices and availability of innovator brands and lowest-priced generics are measured. It provides room for profits for the pharmaceutical industry and at the same time, it advocates a rational pricing structure to promote affordability. The methodology compares the median community retail pharmacy prices/public procurement prices with the International reference prices (IRPs) obtained from the Management Sciences for Health (MSH), USA. By comparing IRPs with median community retail pharmacy prices, a Median Price Ratio (MPR) is obtained.

An MPR could be used as a guide to benchmark prices in a Low to Middle Income Country (LMIC), how high or low are /or should be in a given context. For example, a median price ratio of about 1 is considered reasonable in the public sector while a ratio of roughly 3 is considered fine in the private sector. It considers taxes mark-ups, profit margins, and enough margins for pharmaceutical industry growth, etc. Recent studies have shown that though the majority of medicines in Pakistan are rationally priced, the prices of some innovator brands were high when compared with the international reference prices (IRPs). For example, Acyclovir and atorvastatin were 18 times higher than IRP, Ciprofloxacin, Ceftriaxone injection, Diclofenac sodium were found 15 times higher, Fluconazole (60 times higher), Omeprazole and Simvastatin were found to be more than 12 times higher than IRPs. These are few examples, and there may be other medicines that could be high priced. These medicines and others are commonly used by Pakistanis and this is resulting in significant out-of-pocket payments, impacting affordability.

Drug Pricing Models to Choose From

World Health Organization recommends using multiple pricing methodologies to achieve affordable prices in low and middle-income countries.

• Cost-plus pricing policy – The cost-plus pricing requires significant technical and human resources. The most challenging part of cost-plus pricing is obtaining and validating information on different cost components. This needs more clarity and transparency. The lack of transparency in expenses on pharmaceutical marketing also makes it challenging.

• External Price Referencing – An increasing number of countries are using external price referencing (EPR). Using EPR, governments set medicine prices in their country based on the prices of the same medicines in other countries. External Price Referencing (EPR) is commonly used for new medicines, and evidence suggests that external reference pricing is likely to reduce the prices of medicines

• Internal Reference Pricing – Internal reference pricing is used for linking the prices of substitutable medicines, for example generic, biosimilar, or therapeutically equivalent medicines. A specific type of internal price referencing is called a generic price link. This policy refers to the practice of setting the price of a generic in relationship to the originator medicine, usually at a certain percentage lower than the originator price.

• Value-based Pricing – Value-based pricing uses health technology assessment (HTA) and it must include an analysis on budget impact and affordability from the perspective of the payers and the patients. Conducting value-based pricing is a highly specialized task and needs a health economics unit together with input from pharmacists, clinicians, evidence-based practitioners etc. 

• Mark-up Regulations – Currently, a mark-up of 35 and 15% is applied to the wholesaler and the retailer, in Pakistan respectively. This is fine for medicines that are rationally priced. However, there is a need to develop a regressive mark-up structure, in which the mark-up rate decreases as the price increases. This needs to be implemented rather than a fixed percentage mark-up for all prices.

Final Recommendation

The decision to formulate and set prices needs to be based on empirical pricing studies. As far as we know, pricing policies in Pakistan are formulated in Pakistan by bureaucrats in the regulatory and legal departments, who are mostly inclined to achieve predetermined outcomes. The research should be awarded to academia and other research organizations, and stakeholders should be involved in open discussions to formulate pricing policies.

Concluded.

Disclaimer: Most pictures in these blogs are taken from Google Images and Pexels. Credit is given where known; some do not show copyright ownership. However, if a claim is lodged at any stage, we shall either mention the ownership clearly, or remove the picture with suitable regrets.

References: 

 https://joppp.biomedcentral.com/articles/10.1186/s40545-022-00413-3