My first trip to Chicago, nearly 2 decades ago, was not to attend the ASCO Annual Meeting. It was in my senior resident year in internal medicine, when I was interviewing for a fellowship position in hematology and oncology, that I spent my first 3 days in the Windy City. Rather than visiting all the spots Matthew Broderick showcased in Ferris Bueller's Day Off, I toured restrooms in hospitals, academic institutions, and public places. And no, I was not vomiting every couple of hours because I was nervous. I was actually taking about 27 tablets of antiretrovirals daily after a needle stick injury. What scared me the most for the 6 months or so after that, however, was not becoming infected with HIV. Rather, it was that the patient also had hepatitis C, and there were no good options for post-exposure prophylaxis. Today, new active treatments for hepatitis C are available. But, considering I practice oncology in the middle-income setting of Brazil, it is the high cost of cancer and hepatitis C medications that keeps me up at night.
Differential Pricing Strategies
One of the many strategies for improving access to new treatment modalities in low-resource settings is price discrimination. Price discrimination is an inequitable-sounding, but important, concept of charging different prices for the same product or service in different markets or segments of a market, usually based on consumers’ ability to pay and on the elasticity of demand.
Also called differential, tiered, or equity pricing, price discrimination is often seen in industries outside health care in which discounts and rebates are commonplace, as it allows companies to expand the number of customers able to afford its products.
For pharmaceutical companies, most major expenses lie in drug development and not in the marginal cost of producing one extra tablet or vial of a medication. Drug development costs are typically recovered in the high-income economies of North America, Europe, or Japan, which means price discrimination can help expand the use of new and expensive medications in low- and middle-income countries while improving a company’s bottom line.
Price discrimination policies, for example, have facilitated the successful distribution of lower-cost vaccines and AIDS medications throughout the low-income world. Nonetheless, as simple as the concept is, it has taken us nearly a decade to implement the practice in oncology.
For instance, in 2011, using data from IMS Health, my colleagues and I identified little variation (< 20%) in the price per unit of a basket of drugs (containing oxaliplatin, bevacizumab, cetuximab, trastuzumab, sorafenib, erlotinib, and gefitinib) in Southeast Asian markets, despite the gross national income per capita varying between countries by a factor of 30 or greater.1
More recently, the threat of compulsory licensing and rising overall health care costs has spurred an increasing number of pilot projects using price discrimination in low- and middle-income countries. GlaxoSmithKline, for example, instituted a worldwide price-tier policy for its oncology products, lowering the prices of some medications (such as pazopanib) in low-income countries by up to 70% compared with its prices in the United States. Other companies, such as Eli Lilly, Sanofi-Aventis, and Roche, have used price discrimination for selected products as well.1
Price–volume agreements, in which a buyer guarantees the purchase of a higher number of products or services in exchange for a lower price per unit, are a special form of price discrimination. Some large middle-income countries, such as Brazil, have used price–volume agreements to increase the availability of radiation machines, vaccines, and medications. In 2014, the Brazilian government announced the purchase of 80 linear accelerators from Varian Medical Systems at a combined cost of R$120 million (approximately US$645,000 per machine at the time of the deal). Unfortunately, implementation has been delayed because of the current economic crisis and lack of investment in training and facilities, exemplifying the difficulties low-income nations face in terms of bureaucracy and in cultivating the required human resources needed for cancer care.2 It’s worth noting, however, that Brazil successfully decreased the cost of HPV vaccines to approximately US$8 per dose with similar negotiations.2
Most low- and middle-income nations, indeed most countries in the world, have smaller populations than Brazil. As a result, these countries may not have enough demand for hepatitis C and cancer therapies to interest providers. Consortia of purchasers can overcome this difficulty and help less-populated countries purchase antiviral and antineoplastic medications at a lower expense with better quality and conditions.
The Strategic Fund, also known as the Regional Revolving Fund for Strategic Public Health Supplies, was created by the Pan American Health Organization (PAHO) in September 2000 to promote the acquisition of high-quality medicines and essential public health supplies at affordable prices in the Americas. It helps member nations purchase better-quality medications at lower cost through technical support and scale.
In November 2015, a Brazilian-led initiative proved that such an approach can work. Countries in Mercosur—a trade block that also includes Argentina, Uruguay, Paraguay, Bolivia, and Venezuela—completed the first joint purchase of medicines during a health ministers meeting. The initiative, globally unprecedented as a price-negotiation strategy with pharmaceutical companies, reached discounts of approximately 90% on the purchase of the hepatitis C drugs sofosbuvir, daclatasvir, and simeprevir. The goal was to provide less-populated countries in South America the price contracted by Brazil earlier in the year: US$9.425 for 12 weeks of treatment. The purchased quantity will be defined by each government according to its local demands, and countries should buy the medications through PAHO or in conjunction with other national systems. A second round of joint procurement is planned for 2016, focusing on four drugs to treat cancer and AIDS.3
Price discrimination has its problems, however. For example, some medications still may not be affordable in countries with the lowest income despite price adjustments. There is also the risk of parallel importing of drugs from low- to high-income countries or possible political backlash in nations where prices are higher.
To counteract parallel importing or political backlash, the pharmaceutical industry has implemented control mechanisms and devised ways of providing price discrimination without open discounts through access- and risk-sharing programs. For example, Novartis created the Glivec International Patient Assistance Program for imatinib, which has helped tens of thousands of patients gain access to the medication in more than 80 countries. In India, Roche has begun marketing some of its products under different brand names in hopes of decreasing parallel imports and political backlash while increasing overall sales.
Although challenging, these problems have been overcome for HIV drugs, and price discrimination can help increase access to cancer and hepatitis C medications in low-income settings.
Nonetheless, the international community needs to support countries with the lowest income, which cannot afford new drugs even at the lower price-tiered rates, through assistance and the development of public–private partnerships. Learn more about how you can volunteer to support one of ASCO´s many international initiatives by visiting the ASCO International website.
- Lopes Gde L Jr, et al. Nat Rev Clin Oncol. 2013;10:314-22.
- Strasser-Weippl K, et al. Lancet Oncol. 2015;16:1405-38.
- Ministry of Health, Brazil. Compra conjunta de medicamentos gera economia de até 83%. Portal Brasil. 2015, Vols. Accessed November 19, 2015.